Q2 2011 ----------- GAAP Gross margin 46.7% GAAP Operating margin 11.9% GAAP Earnings per share $ 0.33 Non-GAAP Gross margin 47.8% Non-GAAP Operating margin 20.4% Non-GAAP Earnings per share $ 0.51
- Trailing twelve month adjusted EBITDA $1,164 million
- Net debt reduced $383 million year-on-year to $3,847 million
- Standard and Poor's raises corporate credit rating to "B+" from "B-"
NXP Semiconductors N.V. (
Second Quarter 2011 GAAP Results
Product Revenue from continuing operations was $1,025 million, an increase of 10.7 percent from the $926 million reported in the second quarter of 2010, and an increase of 4.7 percent from the $979 million reported in the first quarter of 2011. Product Revenue is the combination of revenue from the HPMS and Standard Products segments. Total revenue from continuing operations was $1,121 million, an increase of 0.2 percent from the $1,119 million reported in second quarter of 2010 and an increase of 3.6 percent from the $1,082 million reported in the first quarter of 2011.
Revenue attributable to the combination of the Manufacturing Operations and Corporate and Other segments was $96 million, a 50.3 percent decrease from the $193 million reported in the second quarter of 2010, and a 6.8 percent decrease from the $103 million reported in the first quarter of 2011. The anticipated decline was primarily due to lower revenue in the Manufacturing Operations segment, as contractual obligations to provide manufacturing services for previously divested businesses continue to expire. Included in the total revenue for the second quarter of 2010 was $28 million related to the divested NuTune business.
Gross profit from continuing operations for the second quarter of 2011 was $523 million, or 46.7 percent of revenue, as compared to $446 million, or 39.9 percent of revenue reported in the second quarter of 2010. This compares to the $506 million, or 46.8 percent of revenue reported in the first quarter 2011.
Operating income from continuing operations for the second quarter of 2011 was $133 million, or 11.9 percent of revenue, as compared to an operating income of $76 million reported in the second quarter of 2010, or 6.8 percent of revenue. This compares to an operating income of $108 million, or 10.0 percent of revenue as reported in the first quarter of 2011.
Net income for the second quarter of 2011 was $84 million or $0.33 per share (diluted). This compares to a net loss of $362 million, or a loss of $1.68 per share reported in the second quarter of 2010, and net income of $187 million or $0.73 per share (diluted) reported in the first quarter of 2011. During the second quarter of 2011 net income was impacted as compared to the first quarter of 2011 due to currency fluctuations on the company's U.S. dollar-denominated debt.
All current and all prior period financial figures have been restated to reflect the previously announced divesture of NXP's Sound Solutions business. The historical results of the Sound Solutions business are treated as a discontinued operation in NXP's financial statements.
Second Quarter 2011 non-GAAP Results
Non-GAAP gross profit from continuing operations was $536 million, or 47.8 percent of revenue, an increase from the $456 million, or 40.8 percent of revenue reported in the second quarter of 2010. This compares to $517 million, or 47.8 percent of revenue reported in the first quarter of 2011.
Non-GAAP operating income from continuing operations was $229 million, or 20.4 percent of revenue, an increase from the $165 million, or 14.7 percent of revenue, reported in the second quarter of 2010. This compares to the non-GAAP operating income of $223 million, or 20.6 percent of revenue reported in the first quarter of 2011.
Non-GAAP net income was $130 million, or $0.51 per share (diluted). This compares to non-GAAP net income of $74 million, or $0.34 per share (diluted) reported in the second quarter of 2010, and a net income of $117 million or $0.46 per share (diluted) reported in the first quarter of 2011.
"NXP delivered revenue growth during the second quarter at the high end of our original guidance with all of our business lines delivering sequential revenue growth," said Richard Clemmer, NXP Chief Executive Officer. "Our quarterly performance marks the ninth consecutive quarter of sequential product revenue growth, a demonstration of the continued customer adoption of our overall product portfolio. As an example of customer recognition, NXP was recently awarded the "Bosch Supplier Award" from the Bosch Group, the automotive industries largest electronics supplier. The award was due to demonstrated excellence in the areas of manufacturing quality, technology and continuous improvement in product supply. We are very proud of the recognition bestowed on NXP.
"Our overall profitability remained flat during the quarter as non-GAAP gross margin was nearly 48 percent, a 700 basis point improvement versus the year ago period. We once again delivered improved operating profit during the quarter, as non-GAAP operating margin was just over 20 percent, a 570 basis point improvement versus the year ago period and in-line with our original guidance. However, within our HPMS segment, we experienced a moderation in gross margin expansion due to product mix within certain business lines combined with increased input costs.
"On July 4, 2011, we successfully closed the sale of our Sound Solutions business and received $855 million in gross proceeds. The closure of this transaction enables NXP to continue to focus on its core semiconductor business and to accelerate the process of de-leveraging our balance sheet. We have already applied a portion of the proceeds toward debt repayment.
"Within our High Performance Mixed Signal (HPMS) segment, revenue increased 5 percent sequentially, at the high end of our prior expectations. Growth was driven by strong demand within our Wireless Infrastructure, Industrial and Lighting business with high-performance RF power amplifiers, 32-bit ARM-based MCUs and lighting products all showing strong sequential growth. Additionally, as previously anticipated we experienced a seasonal rebound in our Automotive business and continued strength in our Identification business," said Clemmer.
- Annualized cost savings for the Redesign Program were $17 million in the second quarter of 2011, bringing the cumulative total since inception of the program to $831 million. NXP continues to estimate that the total annualized program savings since inception in September 2008 through its expected completion at the end of 2011 to be between $900 to 950 million.
- Cash paid out for the Redesign Program was $15 million in the second quarter of 2011, bringing the cumulative total since the beginning of the program to $712 million. NXP continues to estimate that total program costs since inception in 2008 through its expected completion at the end of 2011 will be no greater than $725 million.
- Net cash interest paid was $80 million during the second quarter of 2011.
- SSMC, NXP's consolidated joint-venture wafer fab with TSMC, reported second quarter 2011 operating income of $33 million, EBITDA of $44 million and had an ending cash balance of $196 million.
- Utilization in NXP wafer fabs averaged 94 percent in the second quarter 2011 compared to 96 percent in the year ago period and 97 percent in the prior quarter.
- During the second quarter of 2011 NXP's total debt balance increased by $73 million due to a combination of currency fluctuations which impact the company's Euro-based long-term debt and by the issuance of a new term loan, due in 2017 for $500 million and the drawdown under the Revolving Credit Facility for $200 million which were partly offset by debt retirement of $664 million.
- On July 5, 2011 NXP announced the completion of its agreement with Dover Corporation (
NYSE: DOV ) whereby Dover's Knowles Electronics business has acquired NXP's Sound Solutions business, initially announced on December 22, 2010. Under the terms of the agreement, Knowles has acquired NXP's Sound Solutions business for $855 million in cash.
- On July 7, 2011 Standard & Poor's raised NXP's corporate credit rating to "B+" from "B-" and removed all ratings from Credit Watch.