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Freescale Semiconductor Announces Third Quarter 2008 Results
Highlights for the third quarter of 2008 include:
- Net sales of $1.41 billion;
- Adjusted EBITDA of $387 million;
- Cash, cash equivalents and short-term investments of $1.30 billion at September 26, 2008.
Net sales for the third quarter of 2008 were $1.41 billion, compared to $1.47 billion in the second quarter of 2008 and $1.45 billion in the third quarter of 2007. Despite a tremendously challenging macroeconomic environment across multiple end markets, the Freescale team delivered solid sales, margins and cash," said Rich Beyer, chairman and CEO.
The reported loss from operations for the three months ended Sept. 26, 2008 was $3.37 billion, compared to a loss of $202 million in the third quarter of 2007. The operating loss for the third quarter of 2008 included non-cash charges related to an impairment to goodwill and intangible assets totaling $3.37 billion.
Adjusted operating earnings (defined in Note 1 in the Notes to the Consolidated Financial Information attached to this press release) for the three months ended Sept. 26, 2008 was $191 million compared to $195 million last year.
Adjusted EBITDA (defined in Note 2 in the Notes to the Consolidated Financial Information attached to this press release) was $387 million for the third quarter of 2008 and $1.66 billion for the 12 months ended Sept. 26, 2008.
A description of Adjusted EBITDA and adjusted operating earnings and the reconciliations to our GAAP results are included in the tables and notes attached to this press release.
The company's net sales figures for the third quarter of 2008 are as follows:
- Microcontroller net sales were $408 million in the third quarter of 2008, compared to $460 million in the second quarter of 2008 and $465 million in the third quarter of 2007.
- RF, Analog and Sensor net sales were $261 million in the third quarter of 2008, compared to $280 million in the second quarter of 2008 and $256 million in the third quarter of 2007.
- Networking and Multimedia products net sales were $307 million in the third quarter of 2008, compared to $312 million in the second quarter of 2008 and $281 million in the third quarter of 2007.
- Cellular net sales were $344 million in the third quarter of 2008, compared to $337 million in the second quarter of 2008 and $349 million in the third quarter of 2007.
- Other net sales were $89 million in the third quarter of 2008 compared to $83 million in the second quarter of 2008 and $95 million in the third quarter of 2007.
Goodwill and Intangible Asset Impairment
During the third quarter of 2008, in connection with the Company's decision to explore strategic options for its cellular products business and the resulting impact on its net sales, as well as the potential impact from weakening market conditions affecting its other businesses, and the lower market capitalizations of its peer group, the Company concluded that indicators of impairment existed with regard to its intangible assets and goodwill. These intangible assets and goodwill were established in purchase accounting at the completion of the merger in December 2006. Consequently, the Company recorded non-cash impairment charges for intangible assets and goodwill totaling $3.37 billion in the third quarter. The goodwill impairment charge is an estimate which the Company expects to finalize in the fourth quarter of 2008.
Reorganization of Business and Other
During the third quarter, the Company recorded Reorganization of Business and other costs, which reflected a net benefit of $139 million. Included in reorganization of business and other was a benefit in connection with the third quarter 2008 settlement with Motorola, including the recognition of all remaining previously deferred revenue and certain cash compensation. This benefit was partially offset by a charge for contract termination fees, impairment costs related to certain research and development assets, and employee severance costs.
In light of the Company's renewed focus on key market leadership positions and given general market conditions, the company has initiated a series of restructuring actions to streamline its cost structure and re-direct some research and development investments into growth markets. These actions will reduce headcount in our supply chain, technology, marketing and general and administrative functions. The Company currently expects to incur cash restructuring charges of approximately $175 million and corresponding annualized cost savings in excess of $400 million. These restructuring costs and savings are inclusive of the severance actions undertaken in the third quarter of 2008.
Cash, cash equivalents and short-term investments were $1.30 billion on September 26, 2008, compared to $1.20 billion on June 27, 2008. Capital expenditures were $53 million or 4 percent of net sales for the third quarter of 2008. The company also announced on Oct. 24, 2008 that it had received approximately $460 million by making a draw under its $750 million revolving credit facility under its Credit Agreement, which expires in 2012.
Third Quarter 2008 Results and Tables
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. 2008.
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