Freescale Semiconductor Announces Fourth Quarter and Full-Year 2014 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) For periods in which we incurred a net loss but generated
adjusted net earnings, dilutive shares have been included in the
diluted weighted average shares and the diluted adjusted net
earnings per share calculations.
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(b) 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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(c) Reflects non-cash, share-based compensation expense under the
provisions of ASC Topic 718, "Compensation - Stock Compensation.”
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(d) Reflects the change in fair value of our interest rate
derivatives which are not designated as cash flow hedges under the
provisions of ASC Topic 815, "Derivatives and Hedging."
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(e) Adjustments to reflect cash income tax expense.
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(f) Reflects losses on extinguishments and modifications of our
long-term debt.
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(g) Reflects items related to our reorganization of business
programs and other charges.
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(h) Reflects adjustments required by our debt instruments, including
business optimization expenses, relocation expenses and other items.
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Note 1
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Adjusted gross margin and adjusted operating earnings represent
gross margin and operating earnings adjusted for the following as
necessary: the impact of acquisition accounting, non-cash
share-based compensation expense and reorganization of businesses
and other items. Adjusted gross margin and adjusted operating
earnings are not recognized terms under U.S. GAAP. Adjusted gross
margin and adjusted operating earnings do not represent gross margin
and operating earnings, as those terms are defined under U.S. GAAP,
and should not be considered alternatives to gross margin and
operating earnings as indicators of our operating performance. We
have included information concerning adjusted gross margin and
adjusted operating earnings because we use such information when
evaluating gross margin and operating earnings to better evaluate
the underlying performance of the Company. Adjusted gross margin and
adjusted operating earnings as presented herein are not necessarily
comparable to similarly titled measures. Reconciliations of adjusted
gross margin to gross margin and adjusted operating earnings to
operating earnings, the most directly comparable U.S. GAAP measures,
have been included in the preceding tables.
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Adjusted net earnings is net earnings (loss) adjusted for the
impact of acquisition accounting, non-cash share-based
compensation expense, fair value adjustments on interest rate
derivatives, deferred and non-current tax expense, losses on
extinguishment or modification of long-term debt and
reorganization of businesses 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 net earnings per share as supplemental
performance measures. We believe adjusted net earnings and
adjusted net 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 net
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 (loss), 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 (benefit), non-cash share-based compensation expense, losses
on extinguishment or modification of long-term debt, reorganization
of businesses and other items and fair value adjustments on interest
rate derivatives, 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, fair value adjustments on interest
rate derivatives, losses on extinguishment and modification of
long-term debt, reorganization of business and other items and other
charges that are included in net earnings. 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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