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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) 
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             .
Commission File Number: 001-34841
NXP Semiconductors N.V.
(Exact name of registrant as specified in its charter)
 
Netherlands
98-1144352
(State or other jurisdiction
of incorporation or organization)
(I.R.S. employer identification number)
60 High Tech Campus
5656 AG
Eindhoven
Netherlands
(Address of principal executive offices)
(Zip code)
+31
40
2729999
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common shares, EUR 0.20 par value
NXPI
The Nasdaq Global Select Market
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes      No  
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes      No  
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company




If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes      No  

As of October 23, 2020, there were 279,749,594 shares of our common stock, €0.20 par value per share, issued and outstanding.



NXP Semiconductors N.V.
Form 10-Q
For the Fiscal Quarter Ended September 27, 2020
TABLE OF CONTENTS
Page





PART I — FINANCIAL INFORMATION
Item 1.    Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
($ in millions, unless otherwise stated)
For the three months endedFor the nine months ended
September 27, 2020September 29, 2019September 27, 2020September 29, 2019
Revenue2,267 2,265 6,105 6,576 
Cost of revenue(1,177)(1,079)(3,158)(3,167)
Gross profit1,090 1,186 2,947 3,409 
Research and development(438)(396)(1,265)(1,219)
Selling, general and administrative(203)(221)(658)(699)
Amortization of acquisition-related intangible assets(418)(358)(1,179)(1,070)
Total operating expenses(1,059)(975)(3,102)(2,988)
Other income (expense)1 22 110 23 
Operating income (loss)32 233 (45)444 
Financial income (expense):
Extinguishment of debt (1) (11)
Other financial income (expense)(106)(84)(280)(246)
Income (loss) before income taxes(74)148 (325)187 
Benefit (provision) for income taxes57 (28)88 (40)
Results relating to equity-accounted investees(1)(1)(3)2 
Net income (loss)(18)119 (240)149 
Less: Net income (loss) attributable to non-controlling interests4 10 17 20 
Net income (loss) attributable to stockholders(22)109 (257)129 
Earnings per share data:
Net income (loss) per common share attributable to stockholders in $
Basic(0.08)0.39 (0.92)0.46 
Diluted(0.08)0.38 (0.92)0.45 
Weighted average number of shares of common stock outstanding during the period (in thousands):
Basic279,467 279,074 279,511 282,496 
Diluted279,467 283,518 279,511 285,819 

See accompanying notes to the Condensed Consolidated Financial Statements
1

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
($ in millions, unless otherwise stated)
For the three months endedFor the nine months ended
September 27, 2020September 29, 2019September 27, 2020September 29, 2019
Net income (loss)(18)119 (240)149 
Other comprehensive income (loss), net of tax:
Change in fair value cash flow hedges4 (9)5 (4)
Change in foreign currency translation adjustment37 (41)14 (47)
Change in net actuarial gain (loss)(1)(1)(4)(5)
Total other comprehensive income (loss)40 (51)15 (56)
Total comprehensive income (loss)22 68 (225)93 
Less: Comprehensive income (loss) attributable to non-controlling interests4 10 17 20 
Total comprehensive income (loss) attributable to stockholders18 58 (242)73 

See accompanying notes to the Condensed Consolidated Financial Statements
2

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

($ in millions, unless otherwise stated)
September 27, 2020December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents3,566 1,045 
Accounts receivable, net755 667 
Assets held for sale 50 
Inventories, net1,064 1,192 
Other current assets219 313 
Total current assets5,604 3,267 
Non-current assets:
Other non-current assets924 732 
Property, plant and equipment, net of accumulated depreciation of $4,110 and $3,742
2,255 2,448 
Identified intangible assets, net of accumulated amortization of $6,843 and $5,764
2,380 3,620 
Goodwill9,959 9,949 
Total non-current assets15,518 16,749 
Total assets21,122 20,016 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable697 944 
Restructuring liabilities-current25 32 
Other current liabilities940 815 
Short-term debt1,749  
Total current liabilities3,411 1,791 
Non-current liabilities:
Long-term debt7,607 7,365 
Restructuring liabilities15  
Deferred tax liabilities136 282 
Other non-current liabilities880 923 
Total non-current liabilities8,638 8,570 
Total liabilities12,049 10,361 
Equity:
Non-controlling interests197 214 
Stockholders’ equity:
Common stock, par value €0.20 per share:
64 64 
Capital in excess of par value15,314 15,184 
Treasury shares, at cost:
35,790,955 shares (2019: 34,082,242 shares)
(3,279)(3,037)
Accumulated other comprehensive income (loss)90 75 
Accumulated deficit(3,313)(2,845)
Total stockholders’ equity8,876 9,441 
Total equity9,073 9,655 
Total liabilities and equity21,122 20,016 

See accompanying notes to the Condensed Consolidated Financial Statements
3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

($ in millions, unless otherwise stated)

For the nine months ended
September 27, 2020September 29, 2019
Cash flows from operating activities:
Net income (loss)(240)149 
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization1,672 1,525 
Share-based compensation295 257 
Amortization of discount (premium) on debt, net(1)34 
Amortization of debt issuance costs7 8 
Net (gain) loss on sale of assets(111)(20)
(Gain) loss on extinguishment of debt 11 
Results relating to equity-accounted investees3 (2)
Deferred tax expense (benefit)(274)(126)
Changes in operating assets and liabilities:
(Increase) decrease in receivables and other current assets(1)(28)
(Increase) decrease in inventories129 135 
Increase (decrease) in accounts payable and other liabilities(14)(425)
Decrease (increase) in other non-current assets(16)36 
Exchange differences6 6 
Other items(2)(1)
Net cash provided by (used for) operating activities1,453 1,559 
Cash flows from investing activities:
Purchase of identified intangible assets(95)(72)
Capital expenditures on property, plant and equipment(288)(388)
Proceeds from disposals of property, plant and equipment3 23 
Purchase of interests in businesses, net of cash acquired(21) 
Proceeds from sale of interests in businesses161 37 
Purchase of investments(15)(19)
Proceeds from sale of investments 1 
Net cash provided by (used for) investing activities(255)(418)
Cash flows from financing activities:
Repurchase of long-term debt (600)
Proceeds from the issuance of long-term debt 2,000 1,750 
Cash paid for debt issuance costs(15)(24)
Payment of bond hedge derivatives - convertible option (1)
Dividends paid to non-controlling interests(34) 
Dividends paid to common stockholders(315)(214)
Proceeds from issuance of common stock through stock plans64 70 
Purchase of treasury shares and restricted stock unit withholdings(370)(1,369)
Net cash provided by (used for) financing activities1,330 (388)
Effect of changes in exchange rates on cash positions(7)(5)
Increase (decrease) in cash and cash equivalents2,521 748 
Cash and cash equivalents at beginning of period1,045 2,789 
Cash and cash equivalents at end of period3,566 3,537 
4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

($ in millions, unless otherwise stated)

Supplemental disclosures to the condensed consolidated cash flows
Net cash paid during the period for:
Interest211 147 
Income taxes103 334 
Net gain (loss) on sale of assets:
Cash proceeds from the sale of assets163 21 
Book value of these assets(52)(1)
Non-cash investing activities:
Non-cash capital expenditures62 272 

See accompanying notes to the Condensed Consolidated Financial Statements
5

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

($ in millions, unless otherwise stated)

Outstanding
number of
shares (in
thousands)
Common
stock
Capital in
excess of
par value
Treasury
shares at
cost
Accumulated
other
comprehensive
income (loss)
Accumulated
deficit
Total
stock-
holders’
equity
Non-
controlling
interests
Total
equity
Balance as of December 31, 2019281,437 64 15,184 (3,037)75 (2,845)9,441 214 9,655 
Net income (loss)(21)(21)8 (13)
Other comprehensive income(61)(61)(61)
Share-based compensation plans108 108 108 
Shares issued pursuant to stock awards497 47 (18)29 29 
Treasury shares and restricted stock unit withholdings(2,933)(355)(355)(355)
Expiration of stock purchase warrants(56)56 — — 
Dividends common stock ($0.375 per share)
(105)(105)(105)
Balance as of March 29, 2020279,001 64 15,236 (3,345)14 (2,933)9,036 222 9,258 
Net income (loss)(214)(214)5 (209)
Other comprehensive income36 36 36 
Share-based compensation plans104 104 104 
Shares issued pursuant to stock awards252 23 (15)8 8 
Treasury shares and restricted stock unit withholdings(40)(3)(3)(3)
Expiration of stock purchase warrants(112)112 — — 
Dividends non-controlling interests(34)(34)
Dividends common stock ($0.375 per share)
(105)(105)(105)
Balance as of June 28, 2020279,213 64 15,228 (3,325)50 (3,155)8,862 193 9,055 
Net income (loss)(22)(22)4 (18)
Other comprehensive income40 40 40 
Share-based compensation plans86 86 86 
Shares issued pursuant to stock awards611 58 (31)27 27 
Treasury shares and restricted stock unit withholdings(95)(12)(12)(12)
Dividends common stock ($0.375 per share)
(105)(105)(105)
Balance as of September 27, 2020279,729 64 15,314 (3,279)90 (3,313)8,876 197 9,073 

6

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

($ in millions, unless otherwise stated)

Outstanding
number of
shares (in
thousands)
Common
stock
Capital in
excess of
par value
Treasury
shares at
cost
Accumulated
other
comprehensive
income (loss)
Accumulated
deficit
Total
stock-
holders’
equity
Non-
controlling
interests
Total
equity
Balance as of December 31, 2018292,790 67 15,460 (3,238)123 (1,907)10,505 185 10,690 
Net income (loss)(21)(21)5 (16)
Other comprehensive income(14)(14)(14)
Share-based compensation plans87 87 87 
Shares issued pursuant to stock awards867 83 (51)32 32 
Treasury shares and restricted stock unit withholdings
(8,482)(715)(715)(715)
Shareholder tax on repurchased shares(62)(62)(62)
Dividends common stock ($0.25 per share)
(71)(71)(71)
Balance as of March 31, 2019285,175 67 15,547 (3,870)109 (2,112)9,741 190 9,931 
Net income (loss)41 41 5 46 
Other comprehensive income9 9 9 
Share-based compensation plans88 88 88 
Shares issued pursuant to stock awards194 18 (12)6 6 
Treasury shares and restricted stock unit withholdings
(6,616)(645)(645)(645)
Shareholder tax on repurchased shares155 155 155 
Dividends common stock ($0.25 per share)
(70)(70)(70)
Balance as of June 30, 2019278,753 67 15,635 (4,497)118 (1,998)9,325 195 9,520 
Net income (loss)109 109 10 119 
Other comprehensive income(51)(51)(51)
Share-based compensation plans87 87 87 
Shares issued pursuant to stock awards815 77 (45)32 32 
Treasury shares and restricted stock unit withholdings
(89)(9)(9)(9)
Shareholder tax on repurchased shares2 2 2 
Dividends common stock ($0.375 per share)
(105)(105)(105)
Balance as of September 29, 2019279,479 67 15,722 (4,429)67 (2,037)9,390 205 9,595 

See accompanying notes to the Condensed Consolidated Financial Statements

7


NXP SEMICONDUCTORS N.V.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
All amounts in millions of $ unless otherwise stated

1 Basis of Presentation and Overview

We prepared our interim condensed consolidated financial statements that accompany these notes in conformity with U.S. generally accepted accounting principles, consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended December 31, 2019.

We have made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates. The interim financial information is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019.

2 Significant Accounting Policies and Recent Accounting Pronouncements

Significant Accounting Policies
Except for the changes below, no material changes have been made to the Company's significant accounting policies disclosed in Note 2 Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, 2019. The accounting policy information below is to aid in the understanding of the financial information disclosed.

New accounting standards not yet adopted
In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 removes disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant. ASU 2018-14 should be applied on a retrospective basis to all periods presented and is effective for annual reporting periods ending after December 15, 2020, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on our financial statement disclosures.

Accounting standards recently adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments are estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. The new accounting guidance generally requires the modified retrospective transition method, with the cumulative effect of applying the new accounting guidance recognized as an adjustment to opening retained earnings in the year of adoption, except for certain financial assets where the prospective transition method is required, such as available-for-sale debt securities for which an other-than-temporary impairment has been recorded. The ASU became effective for us on January 1, 2020. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, the one step quantitative impairment test calculates goodwill impairment as the excess of the carrying value of a reporting unit over its fair value, up to the carrying value of the goodwill. The ASU should be applied on a prospective basis. ASU 2017-04 became effective for us on January 1, 2020. The adoption of this update did not have a material impact on the Company's consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes certain disclosure requirements, including the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 also adds disclosure requirements, including changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments on changes in unrealized gains and losses, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. ASU 2018-13 became effective for us on January 1, 2020. The adoption of this update did not have a material impact on the Company's consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 requires a customer in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Therefore, a customer in a hosting arrangement that is a service contract determines which project stage an implementation activity relates to. Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-
8


implementation stages are expensed as the activities are performed. ASU 2018-15 also requires the customer to expense the capitalized implementation costs over the term of the hosting arrangement, and to apply the existing impairment guidance in Subtopic 350-40 to the capitalized implementation costs as if the costs were long-lived assets. ASU 2018-15 can be applied either retrospectively or prospectively and is effective for annual reporting periods beginning after December 15, 2019, and interim periods therein, with early adoption permitted. ASU 2018-15 became effective for us on January 1, 2020. We have elected to apply the standard prospectively. The adoption of this update did not have a material impact on the Company's consolidated financial statements and related disclosures.

No other new accounting pronouncements were issued or became effective in the period that had, or are expected to have, a material impact on our Consolidated Financial Statements.

3 Acquisitions and Divestments

2020
There were no material acquisitions during the first nine months of 2020. On February 3, 2020, we completed the sale of the Company's Voice and Audio Solutions (VAS) assets, pursuant to the definitive agreement dated August 16, 2019 and which was previously classified as held for sale, with Shenzhen Goodix Technology Co., Ltd. ("Goodix") from China, for a net cash amount of $161 million inclusive of final working capital adjustments. This resulted in a gain of $110 million recorded in Other income (expense) on the Consolidated Statements of Operations.

2019
On December 6, 2019, we completed the acquisition of Marvell’s Wireless WiFi Connectivity Business Unit, Bluetooth technology portfolio and related assets for total consideration of $1.7 billion, net of closing adjustments. The acquisition complements NXP’s processing, security and connectivity offerings in the Industrial & IoT, as well as in the Automotive and Communication Infrastructure markets.

The fair values of the assets acquired and liabilities assumed in the acquisition, by major class, were recognized as follows:
Tangible fixed assets2 
Inventory50 
Identified intangible assets514 
Goodwill1,138 
Deferred tax assets1 
Net assets acquired1,705 
Our valuation procedures related to the acquired assets and assumed liabilities was completed during the second quarter of 2020.

Goodwill arising from the acquisition is attributed to the anticipated growth from new product sales, sales to new customers, the assembled workforce and synergies expected from the combination. Substantially all of the goodwill recognized is expected to be deductible for income tax purposes.

The identified intangible assets assumed were recognized as follows:
Fair ValueWeighted Average Estimated Useful Life (in Years)
Customer relationships (included in customer-related)20 6
Developed technology (included in technology-based)324 4.4
In-process research and development (1)
170 N/A
Total identified intangible assets514 
1)Acquired in-process research and development (“IPR&D”) is an intangible asset classified as an indefinite lived asset until the completion or abandonment of the associated research and development effort. IPR&D will be amortized over an estimated useful life to be determined at the date the associated research and development effort is completed, or expensed immediately when, and if, the project is abandoned. Acquired IPR&D is not amortized during the period that it is considered indefinite lived, but rather is subject to annual testing for impairment or when there are indicators for impairment.

Variations of the income approach were applied to estimate the fair values of the intangible assets acquired. Developed technology and IPR&D were valued using the multi-period excess earnings method which reflects the present values of the projected cash flows that are expected to be generated by the existing technology and IPR&D less charges representing the contribution of other assets to those cash flows. Customer relationships were valued using the distributor method which uses market-based data to support the selection of profitability related to the customer relationship function.

Acquisition-related transaction costs ($5 million) such as legal, accounting and other related expenses were recorded as a component of selling, general and administrative expense in our consolidated statement of operations.

On March 27, 2019, we sold our remaining equity interest in WeEn, receiving net cash proceeds of $37 million.

9



4 Supplemental Financial Information

Statement of Operations Information:

Disaggregation of revenue

The following table presents revenue disaggregated by sales channel:
For the three months endedFor the nine months ended
September 27, 2020September 29, 2019September 27, 2020September 29, 2019
Distributors1,243 1,145 3,286 3,190 
Original Equipment Manufacturers and Electronic Manufacturing Services983 1,082 2,695 3,308 
Other
41 38 124 78 
Total2,267 2,265 6,105 6,576 

Depreciation, amortization and impairment
For the three months endedFor the nine months ended
September 27, 2020September 29, 2019September 27, 2020September 29, 2019
Depreciation of property, plant and equipment139 135 408 387 
Amortization of internal use software1 2 4 6 
Amortization of other identified intangible assets 1)
449 380 1,260 1,132 
Total - Depreciation, amortization and impairment589 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 endedFor the nine months ended
September 27, 2020September 29, 2019September 27, 2020September 29, 2019
Result from MSA and TSA arrangements