10-KPeriod: FY2016

NXP Semiconductors N.V. Annual Report, Year Ended Dec 31, 2016

Filed March 3, 2017For Securities:NXPI

Summary

NXP Semiconductors N.V. (NXPI) reported its 2016 fiscal year results, a period marked by significant strategic actions, including the impactful acquisition of Freescale Semiconductor and the announcement of its impending acquisition by Qualcomm. Financially, NXP saw a substantial revenue increase to $9.5 billion, driven largely by the inclusion of Freescale's operations. However, gross profit margin declined to 42.8% primarily due to purchase accounting adjustments related to the Freescale merger. Operating expenses also rose significantly, largely due to amortization of acquisition-related intangibles and merger integration costs. The company ended the year with a net loss attributable to stockholders of $200 million, a notable decrease from the prior year's profit, largely influenced by the merger-related expenses and a $1.43 billion amortization charge for acquisition-related intangibles. Despite these challenges, NXP's liquidity remained robust, supported by strong cash flow from operations. The company also made significant progress in divesting its Standard Products business, which was completed in early 2017.

Financial Highlights

55 data points
Beta

Revenue

$9.50B

42.8% Gross Margin

Net Income

$200.00M

2.1% Net Margin

EPS (Diluted)

$0.58

Total Assets

$24.90B

Cash & Equivalents

$1.89B

Free Cash Flow

$1.91B

Financial Statements
Beta
Revenue$9.50B
Cost of Revenue$5.43B
Gross Profit$4.07B
R&D Expenses$1.56B
SG&A Expenses$1.14B
Operating Income-$150.00M
Interest Expense$408.00M
Net Income$200.00M
EPS (Basic)$0.59
EPS (Diluted)$0.58
Shares Outstanding (Basic)338.48M
Shares Outstanding (Diluted)347.61M

Key Highlights

  • 1Revenue surged by 55.7% to $9.498 billion, primarily due to the acquisition of Freescale Semiconductor.
  • 2Gross profit margin decreased to 42.8% from 45.7% in the prior year, impacted by purchase accounting adjustments related to the Freescale acquisition.
  • 3Operating expenses more than doubled to $4.228 billion, significantly influenced by $1.527 billion in amortization of acquisition-related intangibles.
  • 4The company reported a net loss attributable to stockholders of $200 million for 2016, compared to a net income of $1.526 billion in 2015.
  • 5NXP announced a definitive agreement in October 2016 to be acquired by Qualcomm for approximately $38 billion, or $110 per share in cash.
  • 6The divestiture of the Standard Products (SP) business was completed in February 2017, resulting in $2.75 billion in cash proceeds.
  • 7Total debt remained substantial at $9.187 billion as of December 31, 2016, though the company's net debt decreased due to strong cash generation.

Frequently Asked Questions

The acquisition of Freescale significantly boosted NXP's revenue by $3.366 billion in 2016. However, it also led to a substantial increase in operating expenses due to $1.43 billion in amortization of acquisition-related intangibles and other merger-related costs. This, combined with purchase accounting impacts on inventory and property, plant, and equipment, contributed to a decline in gross profit margin and a net loss for the year.

In October 2016, NXP announced an agreement to be acquired by Qualcomm for approximately $38 billion, or $110 per share in cash. The tender offer requires the tender of at least 80% of NXP's outstanding shares, and the transaction was expected to close by the end of calendar 2017, pending regulatory approvals and other customary closing conditions.

NXP announced its agreement to divest its Standard Products business in June 2016, and the transaction closed in February 2017, generating $2.75 billion in cash proceeds. While the SP segment revenue slightly declined in 2016, the proceeds from the divestiture provided significant liquidity, which was used to prepay debt. The business was classified as 'held for sale' at year-end 2016.

As of December 31, 2016, NXP had total debt of $9.187 billion. However, the company maintained strong liquidity with $1.894 billion in cash and cash equivalents and an undrawn $600 million revolving credit facility. The company stated that its liquidity sources were sufficient to fund operations, capital expenditures, and debt service for at least the next twelve months.