Freescale Semiconductor, Ltd. (FSL)

FSL 
$21
*  
0.01
0.05%
Get FSL Alerts
*Delayed - data as of Aug. 27, 2014 10:44 ET  -  Find a broker to begin trading FSL now
Exchange: NYSE
Industry: Technology
Community Rating:
View:    FSL Real Time
 
 
Symbol List Views
FlashQuotes InfoQuotes
Stock Details
Summary Quote Real-Time Quote After Hours Quote Pre-market Quote Historical Quote Option Chain
CHARTS
Basic Chart Interactive Chart
COMPANY NEWS
Company Headlines Press Releases Market Stream
STOCK ANALYSIS
Analyst Research Guru Analysis Stock Report Competitors Stock Consultant Stock Comparison
FUNDAMENTALS
Call Transcripts Annual Report Income Statement Revenue/EPS SEC Filings Short Interest Dividend History
HOLDINGS
Ownership Summary Institutional Holdings Insiders
(SEC Form 4)
 Save stocks for next time

Freescale Semiconductor, Inc. (FSL)

Q3 2012 Earnings Call

October 25, 2012 5:00 p.m. EDT

Executives

Mitch Haws – VP, IR

Gregg Lowe – President and CEO

Alan Campbell – SVP, CFO

Analysts

Jim Covello – Goldman Sachs

Stacy Rasgon – Sanford Bernstein

Ross Seymore – Deutsche Bank

Doug Freedman – RBC Capital Markets

John Pitzer – Credit Suisse

C.J. Muse – Barclays Capital

Raji Gill – Needham & Co.

Franklin Jarman – Goldman Sachs

Glen Yeung – Citi

Steven Eliscu – UBS

Jeff Harlib – Barclays Capital

Presentation

Operator

Welcome to Freescale’s third quarter 2012 results conference call.

[Operator Instructions]. Today’s call is being recorded. If anyone has any objections you may disconnect at this time.

I would now like to turn the call over to Mitch Haws. Sir, you may begin.

Mitch Haws

Thank you, and welcome to each of you to our third quarter 2012 earnings conference call. With me today are Gregg Lowe, our President and Chief Executive Officer, and Alan Campbell, Freescale’s Chief Financial Officer.

Before we begin today’s prepared remarks, I’d like to remind everyone that today’s discussion does contain forward-looking statements. They are based on our current outlook and as such do include certain risks and uncertainties. Please refer to our press release, our Form 10-K, and other SEC filings for more information on the specific areas that could cause actual results to differ from what we discuss today.

Also we will reference certain non-GAAP financial measures, and we will post the appropriate GAAP financial reconciliation to our website at freescale.com.

With that let me turn the call over to Gregg.

Gregg Lowe

Thank you. Good afternoon and welcome to our third quarter earnings call. I'll spend a couple of minutes highlighting our Q3 results, after which Alan will provide some additional commentary and insight into the financials. Following Alan's comments, I'll share an update on our strategic review. And then we'll take your questions.

Now looking at the Q3 results, revenues declined 2% to $1.01 billion. Our core product revenue excluding cellular and IP sales grew 2% from the second quarter. Gross margins decreased 75 basis points to 42.0%. And adjusted net earnings were $10 million and adjusted EPS was $0.04.

With that, let me turn the call over to Alan.

Alan Campbell

Well, good afternoon, and thank you again for joining. As I review the Q3 financial results in more detail, please note I will be focusing these results excluding the impact of certain one-time items and adjustments. We believe this to be a more meaningful representation of our ongoing financial performance. Please also note the majority of the purchase price accounting are no longer material.

Well, let me now look into Q3 in more detail, as Gregg said, revenues were $1.01 billion, representing a sequential decrease of 2%. It still declined by 12% compared to the third quarter of last year. Our core product revenues, which exclude IP and cellular, grew 2% sequentially. AISG product sales in the third quarter were $555 million, 2% below the second quarter and 6% below the third quarter of last year. Sales to the automotive market declined sequentially in line with normal seasonality. Our non-auto sales increased sequentially and declined compared to last year. Year-over-year revenues declined both in automotive and our non-auto NCU business.

NMSG revenues were $368 million in the quarter, up 10% from Q2 and down 9% from Q3 of last year. Sequentially, sales benefited from growth in wireless infrastructure, primarily in China. Sales of our application processors to the consumer market increased sequentially as well. And year-over-year networking revenues were negatively impacted by lower demand, primarily in the wireless infrastructure and consumer markets. Cellular product sales were $27 million, and this compares to $50 million in the second quarter and $97 million in the third quarter of last year.

Other products, which again consist primarily of IP revenue and phone resales, resulted in quarterly net sales of $59 million, and this compares to $76 million in the second quarter and $52 million last year. Our IP sales declined sequentially as expected following increased activity in the second quarter. Finally, sales to distributions were flat sequentially, down 5% compared to Q3 of last year.

Looking at distribution, inventory declined $8 million compared to the second quarter. Weeks of inventory was at 9.8 compared to 9.6 in the second quarter and 10.6 in the same period last year. Our book to book-to-bill ratio in the third quarter was 1.0, and this compares to 0.98 in the prior quarter.

Looking at gross margins now and operating expenses, gross margins were 42% compared to the 42.8% in the second quarter. Our gross margins were impacted sequentially by lower IP sales and a planned decline in capacity utilization as we worked to reach $70 in the quarter. Partially offsetting the impact of the lower sales and utilization were procurement savings and operating efficiencies, including product yields. Compared to the third quarter of last year, adjusted gross margins were down 400 basis points, primarily due to lower sales volume, lower utilization and the impact of product mix.

After adjusting for our Toulouse, France facility, our internal front-end factory utilization was approximately 78% in the third quarter. This compares to 83% in Q2 and 83% in the same period of last year. The major change in utilization was related to reductions in our 8-inch [ph] facilities, with an intent to reduce inventory. We do anticipate a further reduction in utilization during the fourth quarter as we continue to focus on inventory reduction.

Now looking at our operating expenses, we continue to manage expenses tightly given the uncertain micro environment. Our operating expenses declined $7 million sequentially and $32 million compared to last year. The key drivers were lower incentive compensation and overall reductions in discretionary expense.

Read the rest of this transcript for free on seekingalpha.com