Freescale Semiconductor Reports First Quarter 2006 Results
AUSTIN, Texas--April 19, 2006--Freescale Semiconductor , today reported its financial results for the first quarter ended March 31, 2006.
First quarter 2006 highlights include:
-- Net sales of $1.53 billion;
-- Gross margin of 45.3%;
-- Net earnings of $212 million;
-- Diluted earnings per share of $.50;
-- Gross margin, net earnings and earnings per share include
stock option expense.
"The Freescale team executed well in the first quarter," said Michel Mayer, chairman and CEO. "We are starting to see momentum in a number of key areas and our earnings growth continues to be strong."
First Quarter 2006
Sales
Net sales in the first quarter of 2006 were $1.53 billion, compared to $1.48 billion in the fourth quarter of 2005 and $1.44 billion in the first quarter of 2005.
Net Earnings
Net earnings for the first quarter of 2006 were $212 million, or $.50 per diluted share, which included incremental stock based compensation expense of $.04 per diluted share associated with the company's adoption of SFAS 123R.
Also included in the first quarter 2006 net earnings is an after-tax gain of $7 million ($.02 per diluted share) as a cumulative effect of a change in accounting principle associated with the company's adoption of SFAS 123R.
This compares to results, reported without option expense, of $192 million or $.45 per diluted share in the fourth quarter of 2005 and $85 million or $.20 per diluted share in the first quarter of 2005.
Operating Earnings
Operating earnings for the first quarter of 2006 were $207 million or 13.6% of net sales compared to $202 million for the fourth quarter of 2005 and operating earnings of $109 million for the first quarter of 2005.
Operating Highlights
Gross margin for the first quarter of 2006 was 45.3%. Adjusting for the gain associated with the Delphi receivable in the fourth quarter of 2005 and stock option expense which began in the first quarter of 2006, gross margins improved by 90 basis points sequentially.
During the first quarter of 2006, the company repurchased 3.8 million shares of its common stock for $100 million. Capital expenditures for the first quarter were $145 million.
Cash, cash equivalents, short-term investments and marketable securities included in investments totaled $3.1 billion in the first quarter of 2006.
Transportation and Standard Products
The Transportation and Standard Products segment reported net sales of $653 million in the first quarter of 2006, compared to $649 million in the fourth quarter of 2005 and $646 million in the first quarter of 2005.
The segment's operating earnings were $129 million in the first quarter of 2006 (20% of net sales), compared to $117 million in fourth quarter of 2005 and $96 million in the first quarter of 2005.
Networking and Computing Systems
The Networking and Computing Systems segment reported net sales of $351 million in the first quarter of 2006, compared to $338 million in the fourth quarter of 2005 and $349 million in the first quarter of 2005.
Operating income in the first quarter of 2006 was $81 million (23% of net sales) compared to $73 million in the fourth quarter of 2005 and $56 million in the first quarter of 2005.
Wireless and Mobile Solutions
The Wireless and Mobile Solutions segment reported net sales of $506 million in the first quarter of 2006, compared to $476 million in the fourth quarter of 2005 and $427 million in the first quarter of 2005.
The segment generated operating income of $34 million (7% of net sales) in the first quarter of 2006, compared to operating income of $38 million in the fourth quarter of 2005 and $6 million in the first quarter of 2005.
Other Operations
Other operations reported an operating loss of ($37) million in the first quarter of 2006 compared to operating losses of ($26) million in the fourth quarter of 2005 and ($49) million in the first quarter of 2005.
Second Quarter 2006 Outlook
For the second quarter of 2006, the company expects to report revenues of $1.50 to $1.60 billion. Gross margins for the second quarter of 2006 are expected to be slightly up from the level reported in the first quarter of 2006.
Conference Call and Webcast
Freescale's quarterly earnings call is scheduled to begin at 4:00 p.m. Central Daylight Time (USA) on Wednesday, April 19, 2006. The company will offer a live webcast of the conference call over 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. These assumptions 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 these and other 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. 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
Freescale Semiconductor, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
Three Months Ended
-------------------------------------
March 31, December 31, April 1,
2006 2005 2005
----------- ----------- -----------
Net sales $ 1,526 $ 1,479 $ 1,442
Cost of sales 835 814 867
----------- ----------- -----------
Gross margin 691 665 575
----------- ----------- -----------
Selling, general and
administrative 187 171 159
Research and development 297 294 292
Reorganization of businesses
and other - (2) 10
Separation expenses - - 5
----------- ----------- -----------
Operating earnings 207 202 109
----------- ----------- -----------
Other income (expense)
Interest income (expense), net 12 9 (5)
Other (1) (6) (10)
----------- ----------- -----------
Total other income (expense) 11 3 (15)
----------- ----------- -----------
Earnings before income taxes
and cumulative effect of
accounting change 218 205 94
Income tax expense 13 13 9
----------- ----------- -----------
Earnings before cumulative
effect of accounting change 205 192 85
Cumulative effect of accounting
change, net of income taxes of
$1 7 - -
----------- ----------- -----------
Net earnings $ 212 $ 192 $ 85
----------- ----------- -----------
Earnings per common share
before cumulative effect of
accounting change:
Basic 0.50 0.47 0.21
Diluted 0.48 0.45 0.20
Cumulative effect of accounting
change per common share:
Basic 0.02 - -
Diluted 0.02 - -
Net earnings per common share:
Basic 0.52 0.47 0.21
Diluted 0.50 0.45 0.20
Weighted average common shares
outstanding:
Basic 408 409 401
Diluted 425 429 416
Freescale Semiconductor, Inc. and Subsidiaries
Condensed Consolidated Segment Information
(Unaudited)
(In millions)
Three Months Ended
-------------------------------------
March 31, December 31, April 1,
2006 2005 2005
----------- ------------- -----------
Net sales:
Transportation and Standard
Products $ 653 $ 649 $ 646
Networking and Computing
Systems 351 338 349
Wireless and Mobile Solutions 506 476 427
Other 16 16 20
-------------------------------------
Segment totals $ 1,526 $ 1,479 $ 1,442
----------- ------------- -----------
Operating earnings:
Transportation and Standard
Products $ 129 $ 117 $ 96
Networking and Computing
Systems 81 73 56
Wireless and Mobile Solutions 34 38 6
Other (37) (26) (49)
----------- ------------- -----------
Segment totals $ 207 $ 202 $ 109
----------- ------------- -----------
Freescale Semiconductor, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
March 31, December 31,
2006 2005
------------ ------------
(Unaudited)
ASSETS
Cash, cash equivalents and short-term
investments $ 1,379 $ 1,421
Accounts receivable, net 545 535
Inventories 682 647
Other current assets 358 367
------------ ------------
Total current assets 2,964 2,970
------------ ------------
Property, plant and equipment, net 2,042 2,035
Investments 1,726 1,616
Other assets 558 549
------------ ------------
Total assets $ 7,290 $ 7,170
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 6 $ 7
Accounts payable 572 469
Accrued liabilities and other 511 663
------------ ------------
Total current liabilities 1,089 1,139
------------ ------------
Long-term debt 1,230 1,230
Other liabilities 353 354
Total stockholders' equity 4,618 4,447
------------ ------------
Total liabilities and stockholders'
equity $ 7,290 $ 7,170
------------ ------------