NXP Semiconductors Reports Fourth Quarter and Full Year 2010 Results

Product Revenue from continuing operations up 43% in 2010 - Trailing twelve month adjusted EBITDA $1,021 million - Net debt reduced $604 million this year to $3,653 million - $1 billion in maturities extended to 2018 - Announced sale of Sound Solutions business for $855 million in cash In this release NXP presents financial performance on both a GAAP and non-GAAP basis (defined later in this release). A reconciliation of GAAP to non-GAAP numbers can be found later in this release. NXP Semiconductors N.V. (Nasdaq: NXPI) today reported financial results for the fourth quarter 2010, ended December 31, 2010, and provided guidance for the first quarter 2011. Note: As announced on December 22, 2010, NXP and Dover Corporation (NYSE: DOV) have reached a definitive agreement under which Dover's affiliate Knowles Electronics will purchase NXP's Sound Solutions business. As a result, comparative figures throughout this report have been restated to reflect Sound Solutions as a discontinued business. This business had previously been reported within the Standard Products segment. NXP had a very successful year in 2010, as we delivered full year Product Revenue growth of 43 percent, and exited the year with non-GAAP operating margin of over 19 percent in the fourth quarter, outpacing the growth of the broader semiconductor market as well as that of our immediate peers", said Richard Clemmer, NXP Chief Executive Officer. We continue to execute on our strategy to invest in product differentiation within the High Performance Mixed Signal business and are delivering significant margin expansion through a combination of our redesign efforts as well as ongoing improvements in product mix, operational efficiency, and continued deliberate actions to improve our capital structure. The HPMS segment represented 77 percent of our Product Revenue in 2010. Within our HPMS segment full-year revenue grew 42 percent during 2010, while we expanded the segment operating margin by over 15 percentage points, resulting in full-year non-GAAP operating margin of 21 percent in this segment. We experienced robust growth across all of our focused end markets in HPMS, with particular strength in our Automotive, Identification and Wireless Infrastructure, Lighting and Industrial segments, which grew in aggregate at better than 50 percent on a year-on-year basis. We were able to achieve this success even as we experienced headwinds in the computing and television end-markets late in the year, a validation of the importance of successfully servicing a broad range of diverse end-market segments. We continue to make significant progress improving our capital structure. Our fourth quarter annualized adjusted EBITDA was $1.2 billion, lowering our implied net debt-to-adjusted EBITDA ratio to approximately 3 times. Additionally, during the fourth quarter, we announced the divesture of our Sound Solutions business. The divesture will enable continued improvement in our capital structure by providing additional capital to reduce our indebtedness and further demonstrates our focus on the HPMS market, which we believe will lead to increased long-term shareholder value," Clemmer said. Fourth Quarter 2010 GAAP Results Revenue from continuing operations was $1,078 million, an increase of 1.0 percent from the $1,067 million reported in fourth quarter of 2009 and a decrease of 3.8 percent from the $1,120 million reported in the third quarter of 2010. Revenue in our Manufacturing Operations and Corporate and Other segments declined $44 million sequentially due to lower revenue in our breakeven manufacturing services business and the previously disclosed sale of our Nutune business. Fourth quarter of 2009 revenue included $130 million related to our divested Home segment. Ongoing support for this divested business is now included in our Manufacturing Operations segment. All current and all prior periods have been restated to reflect the divesture of the Sound Solutions business. Gross profit from continuing operations for the fourth quarter of 2010 was $495 million, or 45.9 percent of revenue. This compares to $370 million, or 34.7 percent of revenue reported in the fourth quarter of 2009 and $476 million, or 42.5 percent of revenue reported in the third quarter of 2010. Operating income from continuing operations for the fourth quarter of 2010 was $106 million, or 9.8 percent of revenue. This compares to a loss of $216 million reported in the fourth quarter of 2009, or 20.2 percent of revenue, and an operating income of $106 million, or 9.5 percent of revenue as reported in the third quarter of 2010. Net income for the fourth quarter of 2010 was a loss of $118 million, or a loss of $0.47 per share. This compares to a net loss of $368 million, or a loss of $1.71 per share reported in the fourth quarter of 2009, and net income of $369 million or $1.55 per share (diluted) reported in the third quarter of 2010. Fourth Quarter 2010 non-GAAP Results Revenue from continuing operations was $1,078 million, an increase of 1.0 percent from the $1,067 million reported in fourth quarter of 2009 and a decrease of 3.8 percent from the $1,120 million reported in the third quarter of 2010. Product Revenue from continuing operations was $938 million in the fourth quarter of 2010 compared to $820 million in the fourth quarter of 2009 and $936 million in the third quarter of 2010. Current and prior period Product Revenue has been restated to reflect the divesture of the Sound Solutions business in the amounts of $99 million for the fourth quarter of 2010, $94 million for the fourth quarter of 2009 and $93 million for the third quarter of 2010. Product Revenue from continuing operations is the combination of revenue from High Performance Mixed Signal (HPMS) and Standard Products segments. Non-GAAP gross profit from continuing operations was $508 million, or 47.1 percent of revenue. This compares to $413 million, or 38.7 percent of revenue reported in the fourth quarter of 2009 and $488 million, or 43.6 percent of revenue reported in the third quarter of 2010. Non-GAAP operating income from continuing operations was $208 million, or 19.3 percent of revenue. This compares to non-GAAP operating income of $59 million, or 5.5 percent of revenue, reported in the fourth quarter of 2009 and nonGAAP operating income of $185 million, or 16.5 percent of revenue reported in the third quarter of 2010. Non-GAAP net income for the fourth quarter of 2010 was $95 million, or a $0.37 per share (diluted). This compares to a loss of $54 million, or a loss of $0.25 per share reported in the fourth quarter of 2009, and a profit of $94 million or $0.39 per share (diluted) reported in the third quarter of 2010. 2010 Full-Year GAAP Results Revenue from continuing operations was $4,402 million, an increase of 25.1 percent from the $3,519 million reported for the full year of 2009. Gross profit from continuing operations was $1,823 million, or 41.4 percent of revenue. This compares to $898 million, or 25.5 percent of revenue reported in 2009. Operating income from continuing operations was $273 million, or 6.2 percent of revenue. This compares to a loss of $931 million a year ago, or 26.5 percent of revenue reported in 2009. Net income was a loss of $456 million or a loss of $1.99 per share, as compared to a loss of $167 million or a loss of $0.78 per share reported in 2009. 2010 Full-Year non-GAAP Results Revenue from continuing operations was $4,402 million, an increase of 25.1 percent from the $3,519 million reported for the full year of 2009. Product Revenue from continuing operations was $3,694 million compared to $2,578 million reported in 2009. Current and prior period Product Revenue has been restated to reflect the divesture of the Sound Solutions business in the amounts of $354 million for 2010 and $324 million for 2009. Product Revenue from continuing operations is the combination of revenue from HPMS and Standard Products segments. Non-GAAP gross profit from continuing operations was $1,875 million, or 42.6 percent of revenue. This compares to $1,125 million, or 32.0 percent of revenue reported in 2009. Non-GAAP operating income from continuing operations was $685 million, or 15.6 percent of revenue. This compares to a loss of $147 million, or 4.2 percent of revenue reported in 2009. Non-GAAP net income was $298 million or $1.28 per share (diluted), as compared to a loss of $570 million or a loss of $2.65 per share reported in 2009. Additional Information - Utilization in our wafer fabs averaged 97 percent in the fourth quarter 2010 compared to 76 percent a year ago and 99 percent in the prior quarter. Capacity expansion plans began in the fourth quarter of 2010 and will continue throughout 2011. The largest investments are in our SSMC wafer fab in Singapore which primarily supports the high growth areas of our HPMS business. - Cash balance at the end of the year was $898 million. - For the full year 2010, NXP generated $359 million of operating cash flow from continuing operations, net of $223 million in payments related to the Redesign Program, the Companys ongoing restructuring program, which began in September 2008. During 2010 net purchases of property, plant and equipment was $227 million. - Cash paid out for the Redesign Program was $42 million in the fourth quarter, bringing the cumulative total since the beginning of the program to $656 million. We continue to estimate that total program costs through its expected completion at the end of 2011 will be no greater than $725 million. - SSMC, our consolidated joint-venture wafer fab with TSMC, reported fourth quarter operating income of $40 million, EBITDA of $50 million and had an ending cash balance of $338 million. - Stock-based compensation was a $9 million benefit in the fourth quarter of 2010, as a result of an adjustment of estimated forfeitures to actual forfeitures, and a $12 million expense for full year 2010. None of the fourth quarter benefit is included in the non-GAAP results. - NXP announced during the fourth quarter of 2010 the signing of a definitive agreement whereby Knowles Electronics will purchase NXPs Sound Solutions business for $855 million in cash. - NXP completed its initial public offering (IPO) of 34 million shares on the NASDAQ Global Select Market during the third quarter of 2010. - NXP completed a bond transaction during the year to extend the maturities of approximately $1 billion of debt to 2018. - Proceeds from the IPO and the bond transaction, plus cash generated from operations, were used to repurchase $461 million of outstanding debt from a limited number of holders in privately negotiated transactions and to repay $200 million on our revolving credit facility. First Quarter 2011 Outlook - Product Revenue from continuing operations for the first quarter of 2011 is anticipated to be relatively flat as compared to the fourth quarter of 2010. Product Revenue from continuing operations is the combination of revenue from HPMS and Standard Products segments. - Revenue in our Manufacturing Operations and Corporate and Other segments is anticipated to decline about $50 million in the first quarter due to lower revenue in our breakeven manufacturing services business and, to a lesser degree, the sale of our Nutune business in the fourth quarter. - Non-GAAP operating income from continuing operations is anticipated to be flat to slightly up compared to the fourth quarter of 2010. Discussion of GAAP to non-GAAP Reconciliations NXP provides financial information on both a U.S. generally accepted accounting principles (GAAP) and non-GAAP basis. Reconciliations of these non-GAAP measures to the most comparable measure calculated in accordance with GAAP are provided in this release. Non-GAAP information should not be considered a substitute for any information derived or calculated in accordance with GAAP. NXP provides this information as an additional insight as to how management assesses the performance and allocation of resources among its various segments and because the financial community uses it in its analysis of NXP's operating performance, historical results and projections of NXP's future operating results. The non-GAAP measures used herein are not intended to be measures of financial performance or condition, liquidity or profitability 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. Certain information referred to in this release, including "comparable growth", "non-GAAP gross margin", "non-GAAP operating margin", "EBITDA" and "Adjusted EBITDA", has not been derived in accordance with GAAP and can vary from other participants in our industry. These measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of NXP's financial results as reported under GAAP. In this release the use of the terms: - "Comparable growth" is a nonญGAAP financial measure that reflects the relative changes in revenue growth between periods adjusted for the effects of foreign currency exchange rate changes, material acquisitions and divestments. NXP revenue is translated from foreign currencies into our reporting currency, the U.S. dollar, at monthly exchange rates and is impacted by significant foreign currency movement on a period to period basis. In addition, reported revenue may be impacted by material acquisitions and divestments. NXP believe that an understanding of our underlying sales performance on a comparable basis year over year is enhanced after these effects are excluded. - "Non-GAAP gross profit", "non-GAAP gross margin", "non-GAAP operating margin", "non-GAAP operating income" and "non-GAAP net income" are all non-GAAP financial measure that reflect the underlying operating and profit structure of NXP operations net of purchase price accounting ("PPA"), restructuring, other incidental items and the impact of other non-cash adjustments. - "EBITDA" and "Adjusted EBITDA" are not intended to be a measure of free cash flow for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments, debt service requirements and replacement of fixed assets. - "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. - "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), gains and losses resulting from our divestment activities. We present other incidental items in our analysis of our results of operations because these costs, gains and losses, have affected the comparability of our results over the years. Conference Call and Webcast Information NXP will host a conference call to discuss its fourth quarter 2010 results and outlook for the first quarter of 2011 today at 8:00 a.m. U.S. Eastern Time (2:00 p.m. Central European Time). To listen to the webcast, 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) provides High Performance Mixed Signal and Standard Product solutions that leverage its leading RF, Analog, Power Management, Interface, Security and Digital Processing expertise. These innovations are used in a wide range of automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer and computing applications. A global semiconductor company with operations in more than 25 countries, NXP posted revenue of $4.4 billion in 2010. For more information visit . Forward-looking Statements This document includes forward-looking statements which include statements regarding our 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, our ability to successfully introduce new technologies and products, the demand for the goods into which our products are incorporated, our ability to generate sufficient cash, raise sufficient capital or refinance our debt at or before maturity to meet both our debt service and research and development and capital investment requirements, our ability to accurately estimate demand and match our production capacity accordingly or obtain supplies from third-party producers, our access to production from third-party outsourcing partners, and any events that might affect their business or our relationship with them, our ability to secure adequate and timely supply of equipment and materials from suppliers, our ability to avoid operational problems and product defects and, if such issues were to arise, to correct them quickly, our ability to form strategic partnerships and joint ventures and successfully cooperate with our alliance partners, our ability to win competitive bid selection processes to develop products for use in our customers equipment and products, our ability to successfully establish a brand identity, our ability to successfully hire and retain key management and senior product architects; and, our ability to maintain good relationships with our suppliers. In addition, this document contains information concerning the semiconductor industry and our 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, our market segments and product areas will develop. We have based these assumptions on information currently available to us, if any one or more of these assumptions turn out to be incorrect, actual market results may differ from those predicted. While we do not know what impact any such differences may have on our business, if there are such differences, our future results of operations and our 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, we do 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 from on our Investor Relations website, www.nxp.com/investor or from the SEC website, . For further information, please contact: Media: Text 100 Public Relations: Lim Choon Hong Tel: +65 6603 9021 [email protected]

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