NXP Semiconductors N.V. reported financial results for the third quarter 2011, ended October 2, 2011, and provided guidance for the fourth quarter 2011.
Third Quarter 2011 GAAP Results
Product Revenue from continuing operations was $970 million, an increase of 3.6 percent from the $936 million reported in the third quarter of 2010, and a decrease of 5.4 percent from the $1,025 million reported in the second quarter of 2011. Product Revenue is the combination of revenue from the HPMS and Standard Products segments. Total revenue from continuing operations was $1,060 million, a decrease of 5.4 percent from the $1,120 million reported in third quarter of 2010 and a decrease of 5.4 percent from the $1,121 million reported in the second quarter of 2011.
Revenue attributable to the combination of the Manufacturing Operations and Corporate and Other segments was $90 million, a 51.1 percent decrease from the $184 million reported in the third quarter of 2010, and a 6.3 percent decrease from the $96 million reported in the second quarter of 2011. The anticipated decline was primarily due to lower revenue in the Manufacturing Operations segment, as contractual obligations to provide manufacturing services for previously divested businesses continue to expire. Included in the total revenue for the third quarter of 2010 was $24 million related to the divested NuTune business.
Gross profit from continuing operations for the third quarter of 2011 was $488 million, or 46.0 percent of revenue, as compared to $476 million, or 42.5 percent of revenue reported in the third quarter of 2010. This compares to the $523 million, or 46.7 percent of revenue reported in the second quarter 2011.
Operating income from continuing operations for the third quarter of 2011 was $109 million, or 10.3 percent of revenue, as compared to an operating income of $106 million reported in the third quarter of 2010, or 9.5 percent of revenue. This compares to an operating income of $133 million, or 11.9 percent of revenue as reported in the second quarter of 2011.
Net income for the third quarter of 2011 was $301 million or $1.21 per share. This compares to a net income of $369 million, or $1.55 per share (diluted) reported in the third quarter of 2010, and net income of $84 million or $0.33 per share (diluted) reported in the second quarter of 2011. Net income for the second quarter of 2011 and the third quarter of 2010 was positively impacted due to currency fluctuations on the company’s U.S. dollar-denominated debt.
Third Quarter 2011 non-GAAP Results
Non-GAAP gross profit from continuing operations was $512 million, or 48.3 percent of revenue, an increase of 4.9 percent from the $488 million, or 43.6 percent of revenue reported in the third quarter of 2010. This compares to $536 million, or 47.8 percent of revenue, a 4.5 percent decline from amount reported in the second quarter of 2011.
Non-GAAP operating income from continuing operations was $210 million, or 19.8 percent of revenue, an increase of 13.5 percent from the $185 million, or 16.5 percent of revenue, reported in the third quarter of 2010. This compares to the non-GAAP operating income of $229 million, or 20.4 percent of revenue, an 8.3 percent decline from the amount reported in the second quarter of 2011.
Non-GAAP net income was $126 million, or $0.50 per share (diluted). This compares to non-GAAP net income of $94 million, or $0.39 per share (diluted) reported in the third quarter of 2010, and a net income of $130 million or $0.51 per share (diluted) reported in the second quarter of 2011.
"During the third quarter NXP delivered revenue around the lower end of our original guidance, as customer order-rates slowed in response to the uncertain macro-economic environment," said Richard Clemmer, NXP Chief Executive Officer. "As we have previously highlighted, our customers continue to actively manage their on-hand inventory exposure, with this trend most notable through our distribution channel. We do not anticipate a re-acceleration of orders to occur in the short-term until our customers have more confidence in the stability of end-market demand. As such, we anticipate order patterns over the next few quarters will continue to be volatile.
"Even as revenue came in at the lower end of our expectations, our overall profitability improved during the quarter as non-GAAP gross margin was just over 48 percent, a 470 basis point improvement versus the year ago period. Our non-GAAP operating profit was in-line with our original guidance, with non-GAAP operating margin just below 20 percent, a 330 basis point improvement versus the year ago period.
"We continued to actively deleverage our balance sheet as our net debt declined $746 million versus the year ago period to $2,956 million, resulting in a net debt to trailing-twelve month adjusted EBITDA of 2.5 times. Additionally we repurchased 3.4 million shares of our common stock for $57 million," said Clemmer.
