Freescale Semiconductor Announces Second Quarter 2008 Results

AUSTIN, Texas--(Business Wire)--
Freescale Semiconductor Holdings I, Ltd. today announced financial
results for the second quarter ended June 27, 2008.

Highlights for the second quarter of 2008 include:

-- Net sales of $1.47 billion;

-- Adjusted EBITDA of $416 million;

-- Cash, cash equivalents and short-term investments of $1.20
billion at June 27, 2008.

A description of Adjusted EBITDA and the reconciliations to our
GAAP results are included in this press release and the accompanying
tables.

Net Sales

Net sales for the second quarter of 2008 were $1.47 billion,
compared to $1.41 billion in the first quarter of 2008 and $1.38
billion in the second quarter of 2007. "Our revenue growth, operating
efficiencies and improved margins represent solid execution on the
part of the Freescale team," said Rich Beyer, Chairman and CEO.

Operating Highlights

Operating earnings, net earnings (loss) and Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA) include
reorganization of business charges and non-cash purchase accounting
expenses related to the company's acquisition by a private equity
consortium in December 2006.

The company believes that providing operating earnings and EBITDA
exclusive of these expenses, and certain other items, is a more
meaningful representation of the company's ongoing financial
performance. Including these expenses, the operating loss and net loss
for the second quarter of 2008 were $137 million and $184 million,
respectively, compared to $268 million and $288 million, respectively,
during the second quarter of 2007.

Excluding the aforementioned expenses, operating earnings were
$234 million and EBITDA was $368 million in the second quarter of
2008. This compares to operating earnings of $159 million and EBITDA
of $311 million in the second quarter of 2007.

The company also uses Adjusted EBITDA to measure compliance with
certain of its debt covenants. Adjusted EBITDA is defined as EBITDA
adjusted to add back non-cash, non-recurring and other items included
in EBITDA and net earnings (loss), as required by various covenants in
the company's debt agreements. Adjusted EBITDA was $416 million for
the second quarter of 2008 and $1.63 billion for the latest 12 months
ended June 27, 2008.

Tables describing EBITDA, Adjusted EBITDA and reconciling net
income to these measures are included in this press release.

Product Revenues

The company's net sales figures for the second quarter of 2008 are
as follows:

-- Microcontroller net sales were $460 million in the second
quarter of 2008, compared to $458 million in the first quarter
of 2008 and $472 million in the second quarter of 2007.

-- RF, Analog and Sensor net sales were $280 million in the
second quarter of 2008, compared to $259 million in the first
quarter of 2008 and $273 million in the second quarter of
2007.

-- Networking and Multimedia net sales were $312 million in the
second quarter of 2008, compared to $269 million in the first
quarter of 2008 and $263 million in the second quarter of
2007.

-- Cellular net sales were $337 million in the second quarter of
2008, compared to $318 million in the first quarter of 2008
and $239 million in the second quarter of 2007.

-- Other net sales were $83 million in the second quarter of
2008, compared to $101 million in the first quarter of 2008
and $129 million in the second quarter of 2007.

Liquidity Highlights

Cash, cash equivalents and short-term investments were $1.20
billion on June 27, 2008, compared to $1.25 billion on March 28, 2008.
Capital expenditures were $74 million or five percent of net sales for
the second quarter of 2008.

Conference Call and Webcast

Freescale's quarterly earnings call is scheduled to begin at 4
p.m. Central Daylight Time on July 22, 2008. The company will offer a
live webcast of the conference call over the Internet at:
www.freescale.com/investor.

Caution Regarding Forward-Looking Statements

This press release includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements relate to our business strategy, goals and expectations
concerning our market position, future operations, margins,
profitability, liquidity and capital resources. Although we believe
the assumptions upon which these forward-looking statements are based
are reasonable, any of these assumptions could prove to be inaccurate
and the forward-looking statements based on these assumptions could be
incorrect. Our operations involve risks and uncertainties, many of
which are outside our control, and any one of which, or a combination
of which, could materially affect our results of operations and
whether the forward-looking statements ultimately prove to be correct.
Actual results and trends in the future may differ materially from
those suggested or implied by the forward-looking statements depending
on a variety of factors. Some of the factors that we believe could
affect our results include our substantial indebtedness; our ability
to service our outstanding indebtedness and the impact such
indebtedness may have on the way we operate our business; the loss of
one or more of our significant customers or strategic relationships;
general economic and business conditions and any downturns in the
cyclical industry in which we operate; our competitive environment and
our ability to make technological advances; interruptions in our
production or manufacturing capacity and our ability to obtain
supplies; economic conditions in the industries in which our products
are sold; maintenance and protection of our intellectual property;
political and economic conditions in the countries where we conduct
business; integration of future acquisitions into our business; the
costs of environmental compliance and/or the imposition of liabilities
under environmental laws and regulations; potential product liability
claims; inability to make necessary capital expenditures; loss of key
personnel; and our ability to achieve cost savings as well as other
matters described under "Risk Factors" in our Annual Report on Form
10-K and other filings with the SEC. We undertake no obligation to
update any information contained in this press release.

About Freescale Semiconductor

Freescale Semiconductor is a global leader in the design and
manufacture of embedded semiconductors for the automotive, consumer,
industrial, networking and wireless markets. The privately held
company is based in Austin, Texas, and has design, research and
development, manufacturing or sales operations in more than 30
countries. Freescale is one of the world's largest semiconductor
companies with 2007 sales of $5.7 billion (USD). www.freescale.com

Freescale and the Freescale logo are trademarks of Freescale
Semiconductor, Inc. All other product or service names are the
property of their respective owners. (C) Freescale Semiconductor, Inc.
2008.

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Freescale Semiconductor Holdings I, Ltd.
Condensed Consolidated Statements of Operations
(Unaudited)

Three Months Ended
---------------------------
(in millions) June 27, March 28, June 29,
2008 2008 2007
-------- --------- --------

Net sales $ 1,472 $ 1,405 $ 1,376
Cost of sales 840 813 809
-------- --------- --------
Gross margin 632 592 567
Selling, general and administrative 175 166 165
Research and development 293 278 286
Amortization expense for acquired
intangible assets 273 272 346
Reorganization of businesses and other 25 26 38
Merger expenses 3 2 -
-------- --------- --------
Operating loss (137) (152) (268)

Other expense, net (146) (190) (188)
-------- --------- --------
Loss before income taxes (283) (342) (456)
Income tax benefit (99) (97) (168)
-------- --------- --------
Net loss $ (184) $ (245) $ (288)
======== ========= ========
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Freescale Semiconductor Holdings I, Ltd.
Reconciliation of Non-GAAP Measures
(Unaudited)

Three months ended
---------------------------
(in millions) June 27, March 28, June 29,
2008 2008 2007
-------- --------- --------

Adjusted gross margin $ 694 $ 645 $ 605
Inventory step-up recognition 7 - -
Incremental depreciation and
amortization expense 55 53 38
-------- --------- --------
Gross margin $ 632 $ 592 $ 567
======== ========= ========

Adjusted operating earnings $ 234 $ 206 $ 159
Sigmatel IP R&D Charge 3 - -
Inventory step-up recognition 7 - -
Incremental depreciation and
amortization expense 60 58 43
Amortization expense for acquired
intangible assets 273 272 346
Reorganization of businesses and other 25 26 38
Merger expenses 3 2 -
-------- --------- --------
Operating loss $ (137) $ (152) $ (268)
======== ========= ========

EBITDA excluding the effects of purchase
accounting and other items $ 368 $ 351 $ 311
Sigmatel IP R&D Charge 3 - -
Inventory step-up recognition 7 - -
Reorganization of businesses and other 25 26 38
Fair value adjustment on interest rate
swaps (14) 25 -
Merger expenses 3 2 -
-------- --------- --------
EBITDA $ 344 $ 298 $ 273
======== ========= ========
*T

Adjusted gross margin and adjusted operating earnings represent
gross margin and operating (loss) earnings adjusted for the following
as necessary: inventory fair value step-up recognition, incremental
depreciation expense for property, plant and equipment fair value
step-up and associated with reduction in lives of certain
manufacturing assets, amortization of acquired intangible assets,
in-process research and development charge, reorganization of
businesses and other charges, and merger expenses. Adjusted gross
margin and adjusted operating earnings are not recognized terms under
generally accepted accounting principles in the United States (U.S.
GAAP). Adjusted gross margin and adjusted operating earnings do not
represent gross margin or operating (loss) earnings, as those terms
are defined under U.S. GAAP, and should not be considered as
alternatives to gross margin or operating (loss) earnings as an
indicator 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 (loss) 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.

EBITDA (earnings before interest, taxes, depreciation and
amortization) excluding the effects of purchase accounting and other
items is a non-U.S. GAAP financial measure. We have included
information concerning EBITDA excluding the effects of purchase
accounting and other items because we use such information when
evaluating operating (loss) earnings to better evaluate the underlying
performance of the Company. EBITDA excluding the effects of purchase
accounting and other items does not represent, and should not be
considered an alternative to, net income (loss), operating income
(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
purchase accounting and 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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Freescale Semiconductor Holdings I, Ltd.
Product Group Net Sales Information
(Unaudited)

(in millions) Three Months Ended
---------------------------
June 27, March 28, June 29,
2008 2008 2007
-------- --------- --------

Microcontroller (a) $ 460 $ 458 $ 472
Cellular (b) 337 318 239
Networking and Multimedia (c) 312 269 263
RF, Analog and Sensors (d) 280 259 273
Other (e) 83 101 129
-------- --------- --------
$ 1,472 $ 1,405 $ 1,376
-------- --------- --------
*T

(a) Microcontroller includes our microcontroller portfolio for
automotive, consumer and industrial applications, as well as
Infotainment, Multimedia & Telematics Operations.

(b) Cellular includes baseband, RF transceivers, power management,
software and full platform development for the wireless handset
market.

(c) Networking & Multimedia includes our processor portfolio based
on Power Architecture(TM), StarCore(R) DSP and i.MX platforms. This
group includes the Networking Systems Division and Digital Home
Operation and the Multimedia Applications Division.

(d) RF, Analog & Sensor incorporates the technologies of our RF,
analog power management and sensing solutions.

(e) Other includes licensing of intellectual property, sales of
wafers to other semiconductor companies, and other miscellaneous
businesses.

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Freescale Semiconductor Holdings I, Ltd.
Adjusted EBITDA
(Unaudited)

Provided below is a reconciliation of net loss to EBITDA to Adjusted
EBITDA:

----------------- ---------------
(in millions) Three Months Twelve months
ended June 27, ended June 27,
2008 2008
----------------- ---------------

Net loss $ (184) $ (1,216)
Interest expense, net 157 731
Income tax (benefit) (99) (601)
Depreciation and amortization(a) 470 1,979
---------------- ---------------
EBITDA $ 344 $ 893
Non-cash stock-based employee
compensation (1) 15 51
Other non-cash charges (2) 10 462
Non-recurring/one-time items (3) 32 81
Cost savings (4) 8 43
Other defined terms (5) 7 98
---------------- ---------------
Adjusted EBITDA $ 416 $ 1,628
================ ===============
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(a) Excludes amortization of debt issuance costs, which are
included in interest expense, net.

(1) Reflects non-cash stock-based employee compensation expense
under the provisions of SFAS No. 123(R), Share-based Payments.

(2) Reflects the non-cash charges related to purchase accounting
adjustments for inventory, asset impairment charges and other non-cash
items.

(3) Reflects costs associated with Predecessor debt
extinguishment, one-time Merger expenses and our reorganization of
business program.

(4) Reflects cost savings that we expect to achieve from certain
initiatives where actions have begun or have already been completed.

(5) Reflects other adjustments required in calculating our debt
covenant compliance.

Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) is a non-U.S. GAAP measure used to determine our
compliance with certain covenants contained in the Credit Facilities
and the indentures governing the Senior Notes and Senior Subordinated
Notes. Adjusted EBITDA is defined as EBITDA adjusted to add back
certain non-cash, non-recurring and other items that are included in
EBITDA and/or net income (loss), as required by various covenants in
the indentures and the Credit Facilities. We believe that the
presentation of Adjusted EBITDA for the three months and year ended
June 27, 2008 is appropriate to provide additional information to
investors to demonstrate compliance with our financing covenants. Our
ability to engage in activities such as incurring additional
indebtedness, making investments and paying dividends is tied to
ratios based on Adjusted EBITDA.

Adjusted EBITDA does not represent, and should not be considered
an alternative to, net income (loss), operating income (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 Adjusted EBITDA and similar measures are frequently
used as measures of operations and the ability to meet debt service
requirements by other companies, our use of Adjusted EBITDA is not
necessarily comparable to such other similarly titled captions of
other companies. The definition of Adjusted EBITDA in the indentures
and the Credit Facilities allows us to add back certain charges that
are deducted in calculating EBITDA and/or net income (loss). However,
some of these expenses may recur, vary greatly and are difficult to
predict. Further, our debt instruments required that Adjusted EBITDA
be calculated for the most recent four fiscal quarters. As a result,
the measure can be disproportionately affected by a particularly
strong or weak quarter. Further, it may not be comparable to the
measure for any subsequent four-quarter period or any complete fiscal
year.

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Freescale Semiconductor Holdings I, Ltd.
Condensed Consolidated Balance Sheets
(in millions)

------------ ------------
June 27, December 31,
2008 2007
(Unaudited)
------------ ------------
ASSETS
Cash and cash equivalents $ 502 $ 206
Short-term investments 697 545
Accounts receivable, net 706 542
Inventory 724 779
Other current assets 425 712
------------ ------------
Total current assets 3,054 2,784

Property, plant and equipment, net 2,296 2,517
Goodwill 5,345 5,350
Intangible assets, net 3,385 3,918
Other assets, net 585 548
------------ ------------
Total assets $ 14,665 $ 15,117
============ ============

LIABILITIES AND STOCKHOLDER'S EQUITY
Notes payable and current portion of long-
term debt and capital lease obligations $ 92 $ 93
Accounts payable 473 385
Accrued liabilities and other 721 574
------------ ------------
Total current liabilities 1,286 1,052

Long-term debt 9,278 9,380
Deferred tax liabilities 897 1,114
Other liabilities 390 381

Stockholder's equity 2,814 3,190
------------ ------------
Total liabilities and stockholder's
equity $ 14,665 $ 15,117
============ ============
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Freescale Semiconductor Holdings I, Ltd.
Reconciliation of Non-GAAP Measures
(Unaudited)

Three months ended
---------------------
(in millions) June 27, March 28,
2008 2008
--------- -----------

Free cash flow $ 19 $ 520
Proceeds from sales of strategic investments
and businesses - (12)
Capital expenditures 74 85
Proceeds from sales of property, plant, and
equipment and assets held for sale (140) (141)
Payments for other assets 18 22
Payments for Acquisition 94 -
--------- -----------
Cash flow provided by operations $ 65 $ 474
========= ===========
*T

Free cash flow is a non-GAAP financial measure which we define as
cash flow provided by operations less capital expenditures. The most
directly comparable GAAP measure is cash flow provided by operations.
We use free cash flow to evaluate financial performance and in
strategic planning, specifically, for investing and financing
decisions. We believe free cash flow is a useful measure because it
reflects the performance of overall operations more accurately than
cash flow provided by operations and because it provides investors
with the same results that we used as the basis for making decisions
about the business. Free cash flow is not an indicator of residual
cash available for discretionary spending because it does not take
into account mandatory debt service or other non-discretionary
spending requirements which are not deducted in the calculation of
free cash flow. We take these limitations into account when using free
cash flow to make investing and financing decisions.

Freescale Semiconductor
Investors:
Mitch Haws, 512-895-2454
mitch.haws@freescale.com
or
Media:
Andy North, 512-996-4418
andy.north@freescale.com

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