NXP Semiconductors Reports Fourth Quarter and Full-year 2014 Results

EINDHOVEN, The Netherlands, Feb. 5, 2015 (GLOBE NEWSWIRE) -- NXP Semiconductors N.V. (Nasdaq:NXPI) today reported financial results for the fourth quarter and the full-year ended December 31, 2014, as well as provided guidance for the first quarter of 2015.

"Our results in the fourth quarter of 2014 came in at the high-end of our guidance, as NXP delivered Product revenue of $1.50 billion, approximately a 20 percent increase from the same period in the prior year and a 2 percent sequential increase – significantly better than historic seasonality on a sequential basis. Total NXP revenue was $1.54 billion, a 1.5 percent sequential increase, and nearly a 19 percent increase from the same period in the prior year. Non-GAAP earnings per share in the fourth quarter was $1.35, at the upper-end of guidance, while non-GAAP free cash flow was $451 million or 29 percent of revenue," said Richard Clemmer, NXP Chief Executive Officer.

"On a full-year basis, NXP delivered strong year-on-year growth, with all of our business lines achieving new historic revenue levels. Full-year Product revenue was $5.5 billion, up 17 percent year-on-year, as demand associated with key HPMS design opportunities continued to accelerate. HPMS segment revenue was $4.2 billion, an increase of 19 percent year-on-year, due to broad based strength across all our target end markets. Standard Product segment revenue was $1.3 billion, an increase of 11 percent year-on-year, reflecting better than overall industry growth in both our discrete and logic product lines. In total, NXP revenue was $5.65 billion, an increase of 17 percent year-on-year, greater than two-times the overall growth of the semiconductor industry. Full-year non-GAAP earnings per share was $4.76, up nearly 45 percent versus 2013, and full-year non-GAAP free cash flow was $1.14 billion, up 68 percent year-on-year, representing 20 percent of total revenue.

"During the fourth quarter, growth within the HPMS segment was better than seasonal and near the upper-end of our guidance range. We achieved record revenue levels in our Identification, Automotive and Infrastructure & Industrial businesses. Revenue in the Identification business was $411 million, up nearly 4 percent sequentially, and up 25 percent from the same period in the prior year. In Automotive revenue was $292 million, up 1 percent versus the third quarter and up 6 percent versus from the same period in the prior year. Within Portable & Computing, revenue was $213 million, down 2 percent from the prior quarter, yet still up 34 percent compared to the same period in the prior year. Revenue in Industrial & Infrastructure was $253 million, up 6 percent sequentially, and up 30 percent from the same period in the prior year.

"In summary, 2014 was a very good year for NXP. Our focused strategy of providing differentiated product solutions was confirmed by strong customer adoption and better than industry revenue growth which drove significant shareholder value. I want to thank all of the engaged NXP employees for their continued contribution and effort," said Clemmer.

Summary of Fourth Quarter and Full-year 2014 Results ($ millions, except EPS, unaudited)

1. Please see "Discussion of GAAP to non-GAAP Reconciliation."

Additional Information for the Fourth Quarter of 2014:

• On December 1, 2014, NXP Semiconductors N.V. issued $1.15 billion of senior cash convertible notes due December 1, 2019. The notes bear interest of 1.0 percent, payable semi-annually in arrears on June 1 and December 1, beginning on June 1, 2015. The initial conversion rate for the Notes is 9.7236 shares of NXP's common stock per $1,000 principal amount, representing an approximate conversion premium of 35 percent above the last reported sale price of $76.18 on November 24, 2014. Further details relating to the issue can be found on NXP's investor relations website at www.nxp.com/investor.
• NXP repurchased approximately 2.4 million shares in the fourth quarter of 2014 for a total cost of approximately $180 million. For the full-year 2014, NXP repurchased approximately 23.2 million shares for a total cost of approximately $1.44 billion, or an average cost per share of $61.73.
• Net cash interest paid in the fourth quarter of 2014 was $30 million, and for the full-year 2014 was $138 million.
• SSMC, NXP's consolidated joint-venture wafer fab with TSMC, reported fourth quarter 2014 operating income of $47 million, EBITDA of $61 million and a closing cash balance of $426 million. For the full-year 2014 SSMC reported operating income of $175 million and EBITDA of $228 million.
• Utilization in NXP wafer-fabs averaged 99 percent in the fourth quarter of 2014 compared to 95 percent in the prior year period and 96 percent in the prior quarter.

Supplemental Information ($ millions, unaudited) – Existing Business Structure

Product revenue is the combination of revenue from the High Performance Mixed Signal (HPMS) and Standard Products (STDP) segments. Percent of quarterly total amounts may not add to 100 percent due to rounding.

Supplemental Information ($ millions, unaudited) – New Business Structure, Effective January 1, 2015

Product revenue is the combination of revenue from the High Performance Mixed Signal (HPMS) and Standard Products (STDP) segments. Percent of quarterly total amounts may not add to 100 percent due to rounding.

Guidance for the First Quarter 2015: ($ millions, except share count and EPS) ⁽¹⁾

Note (1): NXP has based the guidance included in this release on judgments and estimates that management believes are reasonable given its assessment of historical trends and other information reasonably available as of the date of this release. The guidance included in this release consists of predictions only, and is subject to a wide range of known and unknown risks and uncertainties, many of which are beyond NXP's control. The guidance included in this release should not be regarded as representations by NXP that the estimated results will be achieved. Actual results may vary materially from the guidance we provide today. In relation to the use of non-GAAP financial information see the note regarding "Use of Non-GAAP Financial Information" elsewhere in this release. For the factors, risks and uncertainties to which judgments, estimates and forward-looking statements generally are subject see the note regarding "Forward-looking Statements." We undertake no obligation to publicly update or revise any forward-looking statements, including the guidance set forth herein, to reflect future events or circumstances. Considering the uncertain magnitude and variability of the foreign exchange consequences upon "PPA effects," "restructuring costs," "other incidental items" and any interest expense or taxes in future periods, management believes that GAAP financial measures are not available for NXP without unreasonable efforts on a forward looking basis.

Discussion of GAAP to non-GAAP Reconciliations

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) "non-GAAP gross profit," (ii) "non-GAAP gross margin," (iii) "non-GAAP Research and development," (iv) "non-GAAP Selling, general and administrative," (v) non-GAAP Other income," (vi) "non-GAAP operating income (loss)," (vii) "non-GAAP operating margin," (viii) "non-GAAP net income/ (loss)," (ix) "PPA effects," (x) "Restructuring costs," (xi) "Stock based compensation," (xii) "Other incidental items," (xiii) "non-GAAP Financial Income (expense)," (xiv) "non-GAAP Results relating to equity-accounted investees," (xv) "non-GAAP Cash tax (expense)," (xvi) "diluted non-GAAP EPS," (xvii) "EBITDA," "adjusted EBITDA" and "trailing 12 month adjusted EBITDA," (xviii) "net debt," (xix) "non-GAAP free cash flow" and (xx) "non-GAAP free cash flow margin."

In this release, references to:

• "non-GAAP gross profit," "non-GAAP research and development," "non-GAAP Selling, general and administrative," "non-GAAP Other income," "non-GAAP operating income (loss)," and "non-GAAP net income/ (loss)" is to NXP's gross profit, research and development, selling general and administrative, operating income and net income/ (loss) calculated on a basis consistent with GAAP, net of the effects of purchase price accounting ("PPA"), restructuring costs, stock-based compensation, other incidental items and certain other adjustments. "PPA effects" reflect the fair value adjustments impacting acquisition accounting and other acquisition adjustments charged to the income statement applied to the formation of NXP on September 29, 2006 and all subsequent acquisitions. "Restructuring costs" consist of costs related to restructuring programs and gains and losses resulting from divestment activities and impairment charges. "Stock based compensation" consists of incentive expense granted to eligible employees in the form of equity based instruments. "Other incidental items" consist of process and product transfer costs (which refer to the costs incurred in transferring a production process and products from one manufacturing site to another) and certain charges related to acquisitions and divestitures. "Other adjustments" include or exclude certain items that management believes provides insight into our core operating results, our ability to generate cash and underlying business trends affecting our performance.
• "non-GAAP gross margin" and "non-GAAP operating margin" is to our non-GAAP gross profit or our non-GAAP operating income as a percentage of total revenue, respectively;
• "non-GAAP Financial Income (expense)" is the interest income or expense net of impacts due to non-cash interest expense on convertible notes; foreign exchange changes on our Euro-denominated debt; gains or losses due to the extinguishment of long-term debt; changes in fair value of warrant liability; and less other financial expenses deemed to be one-time in nature;
• "non-GAAP Cash tax (expense)" represents the cash tax payments during the period;
• "diluted non-GAAP EPS" attributable to stockholders is to non-GAAP net income or loss attributable to NXP's stockholders, divided by the diluted weighted average number of common shares outstanding during the period, adjusted for treasury shares held;
• "EBITDA" is to NXP's earnings before financial income (expense), taxes, depreciation and amortization. "EBITDA" excludes certain tax payments that may represent a reduction in cash available to us, does not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future, does not reflect changes in, or cash requirements for, our working capital needs and does not reflect the significant financial expense, or the cash requirements necessary to service interest payments, on our debts;
• "adjusted EBITDA" is to EBITDA after adjustments for "restructuring costs," "stock-based compensation," "other incidental items," "other adjustments" and results related to equity accounted investees;
• "trailing 12 month adjusted EBITDA" is to adjusted EBITDA for the last 12 months;
• "net debt" is to the sum total of long and short term debt less total cash and cash equivalents, as reflected on the balance sheet;
• "non-GAAP free cash flow" is the sum of our Net cash provided by (used for) operating activities and our net Capital expenditure on property, plant and equipment, as reflected on the cash flow statement.
• "non-GAAP free cash flow margin" is the sum of our Net cash provided by (used for) operating activities and our net Capital expenditure on property, plant and equipment, as a percentage of total revenue.

Reconciliations of these non-GAAP measures to the most comparable measures calculated in accordance with GAAP are provided in the financial statements portion of this release in a schedule entitled "Financial Reconciliation of GAAP to non-GAAP Results (unaudited)."

NXP provides non-GAAP measures because management believes that they are helpful to understand the underlying operating and profit structure of NXP's operations, to provide additional insight as to how management assesses the performance and allocation of resources among its various segments and because the financial community uses them in its analysis of NXP's operating and/or financial performance, historical results and projections of NXP's future operating results. NXP presents "non-GAAP gross profit," "non-GAAP research and development," "non-GAAP Selling, general and administrative," "non-GAAP Other income," "non-GAAP operating income," "non-GAAP net income/ (loss)," "non-GAAP gross margin," "non-GAAP operating margin" and "non-GAAP EPS" because these financials measures are net of "PPA effects," "restructuring costs," "stock based compensation," "other incidental items," and "other adjustments" which have affected the comparability of NXP's results over the years. NXP presents "EBITDA," "adjusted EBITDA" and "trailing 12 month adjusted EBITDA" because these financials measures enhance an investor's understanding of NXP's financial performance.

Non-GAAP measures should not be considered a substitute for any information derived or calculated in accordance with GAAP, are not intended to be measures of financial performance or condition, liquidity, profitability or operating cash flows in accordance with GAAP, and should not be considered as alternatives to net income (loss), operating income or any other performance measures determined in accordance with GAAP. These non-GAAP measures can vary from other participants in the semiconductor industry. They have limitations as analytical tools and should not be considered in isolation for analysis of NXP's financial results as reported under GAAP.

Conference Call and Webcast Information

NXP will host a conference call on February 5, 2015 at 8:00 a.m. U.S. Eastern Time (2:00 p.m. Central European Time) to discuss its fourth quarter and full-year 2014 financial results and provide an outlook for the first quarter of 2015.

Interested parties may join the conference call by dialing 1 – 866 – 277 – 1184 (within the U.S.) or 1 – 617 – 597 - 5360 (outside of the U.S.). The participant pass-code is 15110829. To listen to a webcast of the event, please visit the Investor Relations section of the NXP website at www.nxp.com/investor. The webcast will be recorded and available for replay shortly after the call concludes.

About NXP Semiconductors

NXP Semiconductors N.V. (Nasdaq:NXPI) creates solutions that enable secure connections for a smarter world. Building on its expertise in High Performance Mixed Signal electronics, NXP is driving innovation in the automotive, identification and mobile industries, and in application areas including wireless infrastructure, lighting, healthcare, industrial, consumer tech and computing. NXP has operations in more than 25 countries, and posted revenue of $5.65 billion in 2014. Find out more at www.nxp.com.

Forward-looking Statements

This document includes forward-looking statements which include statements regarding NXP's business strategy, financial condition, results of operations, and market data, as well as any other statements which are not historical facts. 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. These factors, risks and uncertainties include the following: market demand and semiconductor industry conditions; the ability to successfully introduce new technologies and products; the end-market demand for the goods into which NXP's products are incorporated; the ability to generate sufficient cash, raise sufficient capital or refinance corporate debt at or before maturity; the ability to meet the combination of corporate debt service, research and development and capital investment requirements; the ability to accurately estimate demand and match manufacturing production capacity accordingly or obtain supplies from third-party producers; the access to production capacity from third-party outsourcing partners; any events that might affect third-party business partners or NXP's relationship with them; the ability to secure adequate and timely supply of equipment and materials from suppliers; the ability to avoid operational problems and product defects and, if such issues were to arise, to correct them quickly; the ability to form strategic partnerships and joint ventures and to successfully cooperate with alliance partners; the ability to win competitive bid selection processes to develop products for use in customers' equipment and products; the ability to successfully establish a brand identity; the ability to successfully hire and retain key management and senior product architects; and, the ability to maintain good relationships with our suppliers. In addition, this document contains information concerning the semiconductor industry and NXP's business segments generally, which is forward-looking in nature and is based on a variety of assumptions regarding the ways in which the semiconductor industry, NXP's market segments and product areas may develop. NXP has based these assumptions on information currently available, if any one or more of these assumptions turn out to be incorrect, actual market results may differ from those predicted. While NXP does not know what impact any such differences may have on its business, if there are such differences, its future results of operations and its financial condition could be materially adversely affected. 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. For a discussion of potential risks and uncertainties, please refer to the risk factors listed in our SEC filings. Copies of our SEC filings are available on our Investor Relations website, www.nxp.com/investor or from the SEC website, www.sec.gov.