Supplemental Financial Information

9 Months Ended

Sep. 27, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Statement of Operations Information:

Disaggregation of revenue

The following table presents revenue disaggregated by sales channel:


	For the three months ended			For the nine months ended
	September 27, 2020	September 29, 2019	September 27, 2020	September 29, 2019
Distributors	1,243	1,145	3,286	3,190
Original Equipment Manufacturers and Electronic Manufacturing Services	983	1,082	2,695	3,308
Other	41	38	124	78
Total	2,267	2,265	6,105	6,576

Depreciation, amortization and impairment


	For the three months ended			For the nine months ended
	September 27, 2020	September 29, 2019	September 27, 2020	September 29, 2019
Depreciation of property, plant and equipment	139	135	408	387
Amortization of internal use software	1	2	4	6
Amortization of other identified intangible assets ¹⁾	449	380	1,260	1,132
Total - Depreciation, amortization and impairment	589	517	1,672	1,525

¹⁾ For the three and nine month periods ending September 27, 2020, the amounts include an impairment relative to IPR&D acquired as part of the acquisition of Freescale for an amount of $36 million.

Other income (expense)

Income derived from manufacturing service arrangements (“MSA”) and transitional service arrangements (“TSA”) that are put in place when we divest a business or activity, is included in other income (expense). These arrangements are short-term in nature and are expected to decrease as the divested business or activity becomes more established.

The following table presents the split of other income (expense):


	For the three months ended			For the nine months ended
	September 27, 2020	September 29, 2019	September 27, 2020	September 29, 2019


Result from MSA and TSA arrangements	—	(1)	(1)	1
Other, net	1	23	111	22
Total - Other income (expense)	1	22	110	23

Financial income and expense


	For the three months ended			For the nine months ended
	September 27, 2020	September 29, 2019	September 27, 2020	September 29, 2019
Interest income	3	17	11	42
Interest expense	(100)	(98)	(276)	(274)
Total interest expense, net	(97)	(81)	(265)	(232)
Extinguishment of debt	—	(1)	—	(11)
Foreign exchange rate results	(5)	1	(6)	(6)

Miscellaneous financing costs/income and other, net	(4)	(4)	(9)	(8)
Total other financial income/ (expense)	(9)	(4)	(15)	(25)
Total - Financial income and expenses	(106)	(85)	(280)	(257)

Earnings per share

The computation of earnings per share (EPS) is presented in the following table:


	For the three months ended			For the nine months ended
	September 27, 2020	September 29, 2019	September 27, 2020	September 29, 2019
Net income (loss)	(18)	119	(240)	149
Less: net income (loss) attributable to non-controlling interests	4	10	17	20
Net income (loss) attributable to stockholders	(22)	109	(257)	129

Weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)	279,467	279,074	279,511	282,496
Plus incremental shares from assumed conversion of:
Options ¹⁾	—	772	—	775
Restricted Share Units, Performance Share Units and Equity Rights ²⁾	—	3,672	—	2,548
Warrants ³⁾	—	—	—	—
Dilutive potential common shares	—	4,444	—	3,323

Adjusted weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)	279,467	283,518	279,511	285,819

EPS attributable to stockholders in $:
Basic net income (loss)	(0.08)	0.39	(0.92)	0.46
Diluted net income (loss)	(0.08)	0.38	(0.92)	0.45

¹⁾ Stock options to purchase up to 0.9 million shares of NXP’s common stock that were outstanding in Q3 2020 (Q3 2019: 0.1 million shares) and stock options to purchase up to 0.9 million shares of NXP's common stock that were outstanding YTD 2020 (YTD 2019: 0.1 million shares) were anti-dilutive and were not included in the computation of diluted EPS because the exercise price was greater than the average fair market value of the common stock or the number of shares assumed to be repurchased using the proceeds of unrecognized compensation expense and exercise prices was greater than the weighted average number of shares underlying outstanding stock options.

²⁾ Unvested RSUs, PSUs and equity rights of 7.4 million shares that were outstanding in Q3 2020 (Q3 2019: 0.2 million shares) and unvested RSUs, PSUs and equity rights of 7.4 million shares that were outstanding YTD 2020 (YTD 2019: 0.3 million shares) were anti-dilutive and were not included in the computation of diluted EPS because the number of shares assumed to be repurchased using the proceeds of unrecognized compensation expense was greater than the weighted average number of outstanding unvested RSUs, PSUs and equity rights or the performance goal has not been met yet.

³⁾ Warrants to purchase up to 11.3 million shares of NXP's common stock at a price of $131.39 per share were outstanding in Q3 2019, no warrants were outstanding at the end of Q3 2020. At the end of Q3 2019, the warrants were not included in the computation of diluted EPS because the warrants exercise price was greater than the average fair market value of the common shares.

Balance Sheet Information

Cash and cash equivalents

At September 27, 2020 and December 31, 2019, our cash balance was $3,566 million and $1,045 million, respectively, of which $177 million and $188 million was held by SSMC, our consolidated joint venture company with TSMC. Under the terms of our joint venture agreement with TSMC, a portion of this cash can be distributed by way of a dividend to us, but 38.8% of the dividend will be paid to our joint venture partner. During the second quarter of 2020, a dividend of $90 million was declared by SSMC, which was distributed in the third quarter, with 38.8% being paid to our joint venture partner. In 2019, no dividend was declared by SSMC.

Inventories

The portion of finished goods stored at customer locations under consignment amounted to $36 million as of September 27, 2020 (December 31, 2019: $41 million).

Inventories are summarized as follows:


	September 27, 2020	December 31, 2019
Raw materials	60	52
Work in process	852	894
Finished goods	152	246
	1,064	1,192

The amounts recorded above are net of allowance for obsolescence of $126 million as of September 27, 2020 (December 31, 2019: $114 million).

Accumulated other comprehensive income (loss)

Total comprehensive income (loss) represents net income (loss) plus the results of certain equity changes not reflected in the condensed consolidated statements of operations. The after-tax components of accumulated other comprehensive income (loss) and their corresponding changes are shown below:


	Currency translation differences	Change in fair value cash flow hedges	Net actuarial gain/(losses)	Accumulated Other Comprehensive Income (loss)
As of December 31, 2019	203	2	(130)	75
Other comprehensive income (loss) before reclassifications	14	3	(5)	12
Amounts reclassified out of accumulated other comprehensive income (loss)	—	3	—	3
Tax effects	—	(1)	1	—
Other comprehensive income (loss)	14	5	(4)	15
As of September 27, 2020	217	7	(134)	90

Cash dividends

The following dividends were declared during the first three quarters of 2020 and 2019 under NXP’s quarterly dividend program:


	Fiscal year 2020			Fiscal year 2019
	Dividend per share	Amount	Dividend per share	Amount
First quarter	0.375	105	0.250	71
Second quarter	0.375	105	0.250	70
Third quarter	0.375	105	0.375	105

	1.125	315	0.875	246

The dividend declared in the third quarter (not yet paid) is classified in the condensed consolidated balance sheet in other current liabilities as of September 27, 2020 and subsequently paid on October 5, 2020.