Freescale Semiconductor Reports Second Quarter 2006 Results
July 20 2006 - 3:01PM
Business Wire
Freescale Semiconductor (NYSE:FSL) (NYSE:FSL.B), today reported its
financial results for the second quarter ended June 30, 2006.
Second quarter 2006 highlights include: -- Net sales of $1.60
billion; -- Gross margin of 46.0%; -- Net earnings of $260 million;
-- Diluted earnings per share of $.61 including certain favorable
one-time income tax items totaling $14 million, or $.03 per diluted
share, and stock option expense of $14 million or $.03 per diluted
share. "As we celebrate the second anniversary of our IPO, the
Freescale team continues to make solid progress on improving our
operational performance and we are starting to see the benefit of
our focus on accelerating revenue growth," said Michel Mayer,
chairman and CEO. Second Quarter 2006 Sales Net sales in the second
quarter of 2006 were $1.60 billion, compared to $1.53 billion in
the first quarter of 2006 and $1.47 billion in the second quarter
of 2005, representing sequential growth of 5% and year over year
growth of 9%. Net Earnings Net earnings for the second quarter of
2006 were $260 million, or $.61 per diluted share, which included
stock based compensation expense for stock options of $.03 per
diluted share. This compares to $212 million or $.50 per diluted
share in the first quarter of 2006, including stock option expense,
and $122 million or $.29 per diluted share, reported without stock
option expense, in the second quarter of 2005. Net earnings
benefited from increased sales and higher gross margin performance
compared to both the prior quarter and the prior year. During the
second quarter of 2006, the company recorded $14 million in
one-time, non-cash tax benefits associated with reducing its
valuation allowance by $10 million in one of its foreign entities
and a $4 million tax benefit associated with changes in tax
legislation in the State of Texas. Operating Earnings Operating
earnings for the second quarter of 2006 were $251 million or 15.7%
of net sales compared to $207 million or 13.6% of net sales for the
first quarter of 2006 and $137 million or 9.3% of sales for the
second quarter of 2005. Operating Highlights Gross margin for the
second quarter of 2006 was 46%, compared to 45.3% in the first
quarter of 2006 and 41% in the second quarter of 2005. Gross margin
benefited primarily from higher sales and improvements to the
company's product mix. During the second quarter of 2006, the
company repurchased 3.2 million shares of its common stock. Capital
expenditures for the second quarter were $227 million. Cash, cash
equivalents, short-term investments and marketable securities
included in investments totaled $3.2 billion in the second quarter
of 2006. Transportation and Standard Products The Transportation
and Standard Products segment reported net sales of $697 million in
the second quarter of 2006, compared to $653 million in the first
quarter of 2006 and $651 million in the second quarter of 2005. The
segment's operating earnings were $144 million in the second
quarter of 2006 (21% of net sales), compared to $129 million in the
first quarter of 2006 and $75 million in the second quarter of
2005. Networking and Computing Systems The Networking and Computing
Systems segment reported net sales of $370 million, compared to
$351 million in the first quarter of 2006 and $387 million in the
second quarter of 2005. Operating earnings in the second quarter
were $102 million (28% of net sales), compared to $81 million in
the first quarter of 2006 and $87 million in the second quarter of
2005. Wireless and Mobile Solutions The Wireless and Mobile
Solutions segment reported net sales of $514 million in the second
quarter of 2006, compared to $506 million in the first quarter of
2006 and $417 million in the second quarter of 2005. The segment
generated operating earnings of $26 million (5% of net sales) in
the second quarter of 2006, compared to $34 million in the first
quarter of 2006 and an operating loss of ($1) million in the second
quarter of 2005. Other Operations Other operations, which includes
revenues and expenses not directly attributed to any of the
segments, reported an operating loss of ($21) million in the second
quarter of 2006 compared to operating losses of ($37) million in
the first quarter of 2006 and ($24) million in the second quarter
of 2005. Third Quarter 2006 Outlook For the third quarter of 2006,
the company expects to report revenues of $1.525 to $1.625 billion.
Gross margins for the third quarter of 2006 are expected to be
essentially in-line with the second quarter of 2006. Third quarter
2006 results will include approximately $14 million or $.03 per
share of expense associated with the redemption of $400 million of
the company's floating rate notes. Conference Call and Webcast
Freescale's quarterly earnings call is scheduled to begin at 3:30
p.m. Central Daylight Time (USA) on Thursday, July 20, 2006. The
company will offer a live webcast of the conference call via the
Internet at www.freescale.com/investor. Caution Regarding
Forward-Looking Statements This press release contains
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by words such as expects, anticipates,
plans, believes, estimates, will or words of similar meaning and
include statements regarding the plans and expectations for the
upcoming quarter, the year and the future. Forward-looking
statements are based on management's current expectations and
assumptions, which are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and could
cause actual outcomes to differ materially from the expectations of
the company and its management. These uncertainties, risks and
changes include, but are not limited to the risk factors discussed
from time to time by the company in reports filed with the
Securities and Exchange Commission. We urge you to carefully
consider the risks which are described in the company's Form 10-K
for the year ended December 31, 2005 and in the company's other SEC
filings. The company undertakes no obligation to publicly update
any forward-looking statement, whether as a result of new
information, future developments or otherwise. About Freescale
Freescale Semiconductor, Inc. (NYSE:FSL) (NYSE:FSL.B) is a global
leader in the design and manufacture of embedded semiconductors for
the automotive, consumer, industrial, networking and wireless
markets. Freescale became a publicly traded company in July 2004.
The company is based in Austin, Texas, and has design, research and
development, manufacturing or sales operations in more than 30
countries. Freescale, a member of the S&P 500(R), is one of the
world's largest semiconductor companies with 2005 sales of $5.8
billion (US). www.freescale.com -0- *T Freescale Semiconductor,
Inc. and Subsidiaries Condensed Consolidated Statements of
Operations (In millions, except per share amounts) (Unaudited)
Three Months Ended ------------------------------------- June 30,
March 31, July 1, 2006 2006 2005 ----------- -----------
----------- Net sales $ 1,599 $ 1,526 $ 1,472 Cost of sales 864 835
868 ----------- ----------- ----------- Gross margin 735 691 604
----------- ----------- ----------- Selling, general and
administrative 185 187 162 Research and development 299 297 300
Separation expenses - - 5 ----------- ----------- -----------
Operating earnings 251 207 137 ----------- ----------- -----------
Other income (expense): Interest income, net 8 12 1 Gains on sales
of investments and businesses, net 1 - - Other, net (3) (1) (2)
----------- ----------- ----------- Total other income (expense) 6
11 (1) ----------- ----------- ----------- Earnings before income
taxes and cumulative effect of accounting change 257 218 136 Income
tax (benefit) expense (3) 13 14 ----------- ----------- -----------
Earnings before cumulative effect of accounting change 260 205 122
Cumulative effect of accounting change, net of income tax expense -
7 - ----------- ----------- ----------- Net earnings $ 260 $ 212 $
122 ----------- ----------- ----------- Earnings per common share
before cumulative effect of accounting change: Basic 0.64 0.50 0.30
Diluted 0.61 0.48 0.29 Cumulative effect of accounting change per
common share: Basic - 0.02 - Diluted - 0.02 - Net earnings per
common share: Basic 0.64 0.52 0.30 Diluted 0.61 0.50 0.29 Weighted
average common shares outstanding: Basic 406 408 403 Diluted 424
425 420 Freescale Semiconductor, Inc. and Subsidiaries Condensed
Consolidated Segment Information (Unaudited) (In millions) Three
Months Ended ------------------------------------- June 30, March
31, July 1, 2006 2006 2005 ----------- ----------- ----------- Net
sales: Transportation and Standard Products $ 697 $ 653 $ 651
Networking and Computing Systems 370 351 387 Wireless and Mobile
Solutions 514 506 417 Other 18 16 17 ----------- ------------
------------ Segment totals $ 1,599 $ 1,526 $ 1,472 -----------
----------- ----------- Operating earnings: Transportation and
Standard Products $ 144 $ 129 $ 75 Networking and Computing Systems
102 81 87 Wireless and Mobile Solutions 26 34 (1) Other (21) (37)
(24) ----------- ----------- ----------- Segment totals $ 251 $ 207
$ 137 ----------- ----------- ----------- Freescale Semiconductor,
Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In
millions) June 30, December 31, 2006 2005 -------------
------------- (Unaudited) ASSETS Cash, cash equivalents and
short-term investments $ 1,487 $ 1,421 Accounts receivable, net 605
535 Inventories 693 647 Other current assets 343 367 -------------
-------------- Total current assets 3,128 2,970 -------------
-------------- Property, plant and equipment, net 2,159 2,035
Investments 1,736 1,616 Other assets 581 549 -------------
-------------- Total assets $ 7,604 $ 7,170 -------------
------------- LIABILITIES AND STOCKHOLDERS' EQUITY Notes payable
and current portion of long-term debt and capital lease obligations
$ 407 $ 7 Accounts payable 593 469 Accrued liabilities and other
571 663 ------------- -------------- Total current liabilities
1,571 1,139 ------------- -------------- Long-term debt 831 1,230
Other liabilities 357 354 Total stockholders' equity 4,845 4,447
------------- -------------- Total liabilities and stockholders'
equity $ 7,604 $ 7,170 ------------- ------------- *T
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