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NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
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Summary of Key Reconciling Items
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(a) No dilutive securities have been included in the diluted net
loss or adjusted net loss per share calculations in periods where a
net loss or adjusted net loss was incurred.
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(b) Reflects amortization expense for trademarks/tradenames due to
purchase price accounting relating to our acquisition by a
consortium of investors in 2006.
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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.
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(h) Reflects costs savings that we expect to achieve from
initiatives commenced prior to December 31, 2009 under our
reorganization of business programs that are in process or have
already been completed.
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(i) 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 operating earnings represents operating earnings adjusted
for the amortization of acquired intangible assets, non-cash
share-based compensation expense and reorganization of businesses
and other charges (benefits). Adjusted operating earnings is not a
recognized term under U.S. GAAP. Adjusted operating earnings does
not represent operating earnings, as that term is defined under U.S.
GAAP, and should not be considered an alternative to operating
earnings as an indicator of our operating performance. We have
included information concerning adjusted operating earnings (loss)
because we use such information when evaluating operating earnings
to better evaluate the underlying performance of the Company.
Adjusted operating earnings (loss) as presented herein is not
necessarily comparable to similarly titled measures. A
reconciliation of adjusted operating earnings to operating earnings,
the most directly comparable U.S. GAAP measure, has been included in
the preceding tables.
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Adjusted net earnings (loss) is net earnings (loss), adjusted for
certain items that we believe are not indicative of the performance
of our ongoing operations. We present adjusted net earnings (loss)
as a supplemental performance measure. We believe adjusted net
earnings (loss) is helpful to an understanding of our business and
provides 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 (loss) facilitates internal comparisons of our
historical financial position and operating performance on a more
consistent basis, we also use adjusted net earnings (loss) 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 (loss) has limitations
as an analytical tool, and should not be considered in isolation or
as a substitute for an analysis of our results as reported under
U.S. GAAP. We compensate for these limitations by relying primarily
on our U.S. GAAP results and using adjusted net earnings (loss) only
supplementally. A reconciliation of adjusted net earnings (loss) 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. 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 (loss), operating earnings (loss), 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.
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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 existing notes and senior credit facilities.
Adjusted EBITDA is net earnings (loss) adjusted for certain non-cash
and other items that are included in net earnings (loss). 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 (loss), operating earnings (loss), 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 (loss). 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 (loss), 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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