Freescale Semiconductor Announces Second Quarter 2015 Results
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NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
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Summary of Key Reconciling Items
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(a)
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Reflects the effects of acquisition accounting, including our
acquisition by a consortium of investors in 2006, and the related
amortization expense for developed technology, trademarks/tradenames
and customer relationships along with inventory step-up recognition,
as applicable.
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(b)
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Reflects non-cash, share-based compensation expense under the
provisions of ASC Topic 718, "Compensation - Stock Compensation.”
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(c)
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Reflects items related to our reorganization of business programs,
expenses associated with our proposed merger with NXP and other
items.
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(d)
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Adjustments to reflect cash income tax expense.
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(e)
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Reflects losses on extinguishments and modifications of our
long-term debt.
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(f)
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Reflects adjustments required by our debt instruments, including
business optimization expenses, relocation expenses and other items.
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(g)
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Reflects non-cash income tax benefit resulting when compensation
cost from non-qualified share-based compensation recognized on the
entity's tax return exceeds cost from equity-based compensation
recognized in the financial statements.
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Note 1
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Adjusted operating earnings represents operating earnings adjusted
for the following, as necessary: the impact of acquisition
accounting, non-cash share-based compensation expense and
reorganization of business, merger expenses and other items.
Adjusted operating earnings is not a recognized term under U.S.
GAAP. Adjusted operating earnings does not represent operating
earnings, as that term is defined under U.S. GAAP, and should not be
considered an alternative to operating earnings as an indicator of
our operating performance. We have included information concerning
adjusted operating earnings because we use such information to
better evaluate the underlying performance of the Company. Adjusted
operating earnings as presented herein is not necessarily comparable
to similarly titled measures. A reconciliation of adjusted operating
earnings to operating earnings, the most directly comparable U.S.
GAAP measure, has been included in the preceding tables.
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Adjusted net earnings is net earnings adjusted for the impact of
acquisition accounting, non-cash share-based compensation expense,
deferred and non-current tax expense, losses on extinguishment or
modification of long-term debt and reorganization of business,
merger expenses and other items, which we believe are not indicative
of the performance of our ongoing operations. Adjusted earnings per
common share is calculated by dividing adjusted net earnings by the
basic or diluted weighted average common shares outstanding for the
period. We present adjusted net earnings and adjusted earnings per
share as supplemental performance measures. We believe adjusted net
earnings and adjusted earnings per share are helpful to an
understanding of our business and provide a means of evaluating our
performance from period to period on a more consistent basis. This
presentation should not be construed as an indication that similar
items will not recur or that our future results will be unaffected
by other items that we consider to be outside the ordinary course of
our business. Because adjusted net earnings and adjusted earnings
per share facilitate internal comparisons of our historical
financial position and operating performance on a more consistent
basis, we also use adjusted net earnings and adjusted earnings per
share for business planning purposes, in measuring our performance
relative to that of our competitors and in evaluating the
effectiveness of our operational strategies. Adjusted net earnings
and adjusted earnings per share have limitations as analytical tools
and should not be considered in isolation or as a substitute for an
analysis of our results as reported under U.S. GAAP. A
reconciliation of adjusted net earnings to net earnings, the most
directly comparable U.S. GAAP performance measure, has been included
in the preceding tables.
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EBITDA (earnings before interest, taxes, depreciation and
amortization) excluding the effects of other items, is a non-U.S.
GAAP financial measure and represents net earnings adjusted for
depreciation, amortization, interest expense, net, income tax
expense, non-cash share-based compensation expense, losses on
extinguishment or modification of long-term debt, and reorganization
of business, merger expenses and other items, as necessary. We have
included information concerning EBITDA excluding the effects of
other items because we use such information to supplementally
evaluate the underlying performance of the Company. EBITDA excluding
the effects of other items does not represent, and should not be
considered an alternative to, net earnings, operating earnings, 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 EBITDA excluding the effects of
other items and similar measures are frequently used as measures of
operations and the ability to meet debt service requirements by
other companies, our use of this financial measure is not
necessarily comparable to such other similarly titled captions of
other companies. A reconciliation of EBITDA excluding the effects of
other items to net earnings, the most directly comparable U.S. GAAP
measure, has been included in the preceding tables.
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Adjusted EBITDA as shown in the preceding tables is calculated in
accordance with the agreement and indentures governing Freescale
Semiconductor, Inc.’s notes and senior credit facilities. Adjusted
EBITDA is net earnings adjusted for interest expense, net, income
tax expense, depreciation and amortization expense, non-cash
share-based compensation expense, losses on extinguishment and
modification of long-term debt, reorganization of business, merger
expenses and other items and other charges that are included in net
earnings (loss). The ability of our subsidiaries to engage in
activities such as incurring additional indebtedness, making
investments and paying dividends is tied to ratios under the
indentures and the senior credit facilities based on adjusted EBITDA
calculated for the most recent four fiscal quarters. Accordingly, we
believe it is useful to provide the calculation of adjusted EBITDA
to investors for purposes of determining our ability to engage in
these activities. Adjusted EBITDA is a non-U.S. GAAP financial
measure. Adjusted EBITDA does not represent, and should not be
considered an alternative to, net earnings, operating earnings, 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. Although adjusted EBITDA and similar
measures are frequently used as measures of operations and the
ability to meet debt service requirements by other companies, our
calculation of adjusted EBITDA is not necessarily comparable to such
other similarly titled captions of other companies. The calculation
of adjusted EBITDA in the indentures and the senior credit
facilities allows us to add back certain charges that are deducted
in calculating net earnings. However, some of these expenses may
recur, vary greatly and are difficult to predict. Further, our debt
instruments require that adjusted EBITDA be calculated for the most
recent four fiscal quarters. We do not report adjusted EBITDA on a
quarterly basis. In addition, the measure can be disproportionately
affected by quarterly fluctuations in our operating results, and it
may not be comparable to the measure for any subsequent quarter,
four-quarter period or any complete fiscal year. A reconciliation of
net earnings, which is a U.S. GAAP measure of our operating results,
to adjusted EBITDA, calculated as described above, has been included
in the preceding tables.
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Free cash flow represents adjusted cash flows from operating
activities, less purchases of property, plant and equipment, and is
a measure that takes into consideration the capital investments
required to maintain the operations of our business and execute our
strategy, as cash flows from operating activities adds back non-cash
depreciation expense to earnings but does not reflect a charge for
necessary capital expenditures. Adjusted cash flows from operating
activities represents cash flows from operating activities, plus
excess tax benefits from share-based compensation. U.S. GAAP
requires the excess tax benefits from share-based compensation to be
reported as a financing cash flow rather than as an operating cash
flow. We have added this benefit back to our calculation of adjusted
cash flows from operating activities and free cash flow in order to
generally classify cash flows arising from income taxes as operating
cash flows. We believe adjusted cash flows from operating activities
and free cash flow provide useful information to investors regarding
our ability to generate cash from business operations that is
available for acquisitions and other investments and service of debt
principal. We use adjusted cash flows from operating activities and
free cash flow as measures to monitor and evaluate operating
performance. Adjusted cash flows from operating activities and free
cash flow presented herein is not necessarily comparable to
similarly titled measures of other companies. A reconciliation of
adjusted cash flows from operating activities and free cash flow to
cash flows from operating activities, the most directly comparable
U.S. GAAP measures, have been included in the preceding tables.
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