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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 April 3, 2022
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 April 29, 2022, there were 262,564,790 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 April 3, 2022
TABLE OF CONTENTS





PART I — FINANCIAL INFORMATION
Item 1.    Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
($ in millions, unless otherwise stated)
For the three months ended
April 3, 2022April 4, 2021
Revenue3,136 2,567 
Cost of revenue(1,359)(1,212)
Gross profit1,777 1,355 
Research and development(518)(461)
Selling, general and administrative(251)(222)
Amortization of acquisition-related intangible assets(135)(180)
Total operating expenses(904)(863)
Other income (expense)  
Operating income (loss)873 492 
Financial income (expense):
Other financial income (expense)(105)(87)
Income (loss) before income taxes768 405 
Benefit (provision) for income taxes(114)(40)
Results relating to equity-accounted investees12 (1)
Net income (loss)666 364 
Less: Net income (loss) attributable to non-controlling interests9 11 
Net income (loss) attributable to stockholders657 353 
Earnings per share data:
Net income (loss) per common share attributable to stockholders in $
Basic2.50 1.27 
Diluted2.48 1.25 
Weighted average number of shares of common stock outstanding during the period (in thousands):
Basic263,089 277,526 
Diluted265,109 283,263 

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 ended
April 3, 2022April 4, 2021
Net income (loss)666 364 
Other comprehensive income (loss), net of tax:
Change in fair value cash flow hedges(4)(14)
Change in foreign currency translation adjustment(18)(42)
Change in net actuarial gain (loss)  
Total other comprehensive income (loss)(22)(56)
Total comprehensive income (loss)644 308 
Less: Comprehensive income (loss) attributable to non-controlling interests9 11 
Total comprehensive income (loss) attributable to stockholders635 297 

See accompanying notes to the Condensed Consolidated Financial Statements
2

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

($ in millions, unless otherwise stated)
April 3, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents2,683 2,830 
Accounts receivable, net925 923 
Inventories, net1,311 1,189 
Other current assets356 286 
Total current assets5,275 5,228 
Non-current assets:
Other non-current assets1,701 1,346 
Property, plant and equipment, net of accumulated depreciation of $4,805 and $4,676
2,814 2,635 
Identified intangible assets, net of accumulated amortization of $3,059 and $3,021
1,577 1,694 
Goodwill9,954 9,961 
Total non-current assets16,046 15,636 
Total assets21,321 20,864 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable1,369 1,252 
Restructuring liabilities-current16 25 
Other current liabilities1,460 1,175 
Total current liabilities2,845 2,452 
Non-current liabilities:
Long-term debt10,573 10,572 
Restructuring liabilities14 12 
Deferred tax liabilities53 57 
Other non-current liabilities1,076 1,001 
Total non-current liabilities11,716 11,642 
Total liabilities14,561 14,094 
Equity:
Non-controlling interests251 242 
Stockholders’ equity:
Common stock, par value €0.20 per share:
56 56 
Capital in excess of par value13,819 13,727 
Treasury shares, at cost:
 11,966,850 shares (2021: 9,569,359 shares)
(2,433)(1,932)
Accumulated other comprehensive income (loss)26 48 
Accumulated deficit(4,959)(5,371)
Total stockholders’ equity6,509 6,528 
Total equity6,760 6,770 
Total liabilities and equity21,321 20,864 

See accompanying notes to the Condensed Consolidated Financial Statements
3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

($ in millions, unless otherwise stated)

For the three months ended
April 3, 2022April 4, 2021
Cash flows from operating activities:
Net income (loss)666 364 
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization310 341 
Share-based compensation89 91 
Amortization of discount (premium) on debt, net1  
Amortization of debt issuance costs2 2 
Net (gain) loss on sale of assets(1) 
(Gain) loss on equity security, net(4)(3)
Results relating to equity-accounted investees(12)1 
Deferred tax expense (benefit)(33)12 
Changes in operating assets and liabilities:
(Increase) decrease in receivables and other current assets(61)(95)
(Increase) decrease in inventories(122)(26)
Increase (decrease) in accounts payable and other liabilities266 51 
Decrease (increase) in other non-current assets(247)(8)
Exchange differences (1)
Other items2 3 
Net cash provided by (used for) operating activities856 732 
Cash flows from investing activities:
Purchase of identified intangible assets(43)(37)
Capital expenditures on property, plant and equipment(280)(150)
Purchase of equipment leased to others(5) 
Proceeds from disposals of property, plant and equipment1  
Purchase of interests in businesses, net of cash acquired(4) 
Purchase of investments (2)
Proceeds from sale of investments 8 
Proceeds from return of equity investment2  
Net cash provided by (used for) investing activities(329)(181)
Cash flows from financing activities:
Cash paid for debt issuance costs(1) 
Dividends paid to common stockholders(149)(105)
Proceeds from issuance of common stock through stock plans28 31 
Purchase of treasury shares and restricted stock unit withholdings(552)(905)
Net cash provided by (used for) financing activities(674)(979)
Effect of changes in exchange rates on cash positions (5)
Increase (decrease) in cash and cash equivalents(147)(433)
Cash and cash equivalents at beginning of period2,830 2,275 
Cash and cash equivalents at end of period2,683 1,842 
Supplemental disclosures to the condensed consolidated cash flows
Net cash paid during the period for:
Interest45 56 
Income taxes, net of refunds122 40 
Net gain (loss) on sale of assets:
Cash proceeds from the sale of assets1  
Book value of these assets  
Non-cash investing activities:
Non-cash capital expenditures246 121 

See accompanying notes to the Condensed Consolidated Financial Statements
4

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, 2021264,950 56 13,727 (1,932)48 (5,371)6,528 242 6,770 
Net income (loss)657 657 9 666 
Other comprehensive income(22)(22)(22)
Share-based compensation plans92 92 92 
Shares issued pursuant to stock awards256 51 (23)28 28 
Treasury shares repurchased and retired(2,653)(552)(552)(552)
Dividends common stock ($0.845 per share)
(222)(222)(222)
Balance as of April 3, 2022262,553 56 13,819 (2,433)26 (4,959)6,509 251 6,760 



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, 2020280,475 59 14,133 (1,037)117 (4,328)8,944 207 9,151 
Net income (loss)353 353 11 364 
Other comprehensive income(56)(56)(56)
Share-based compensation plans91 91 91 
Shares issued pursuant to stock awards361 37 (6)31 31 
Treasury shares repurchased and retired
(5,087)(905)(905)(905)
Dividends common stock ($0.5625 per share)
(155)(155)(155)
Balance as of April 4, 2021275,749 59 14,224 (1,905)61 (4,136)8,303 218 8,521 

See accompanying notes to the Condensed Consolidated Financial Statements

5


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, 2021.

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, 2021.

2 Significant Accounting Policies and Recent Accounting Pronouncements

Significant Accounting Policies
For a discussion of our significant accounting policies see, “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – “Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended December 31, 2021.

Accounting standards recently adopted

No 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

2022
There were no material acquisitions or divestments during the first three months of 2022.

2021
On July 6, 2021, we acquired Retune DSP for a total consideration of $15.7 million, net of closing adjustments.


4 Supplemental Financial Information

Statement of Operations Information:

Disaggregation of revenue

The following table presents revenue disaggregated by sales channel:
For the three months ended
April 3, 2022April 4, 2021
Distributors1,680 1,468 
Original Equipment Manufacturers and Electronic Manufacturing Services1,412 1,064 
Other
44 35 
Total3,136 2,567 
6



Depreciation, amortization and impairment

For the three months ended
April 3, 2022April 4, 2021
Depreciation of property, plant and equipment142 132 
Amortization of internal use software2 2 
Amortization of other identified intangible assets 1)
166 207 
Total - Depreciation, amortization and impairment310 341 
1) For the three month period ending April 4, 2021, the amount includes an impairment charge as a result of the discontinuation of an IPR&D project for an amount of $36 million.


Financial income and expense

For the three months ended
April 3, 2022April 4, 2021
Interest income2 1 
Interest expense(104)(87)
Total interest expense, net(102)(86)
Foreign exchange rate results 1 
Miscellaneous financing costs/income and other, net(3)(2)
Total other financial income/ (expense)(3)(1)
Total - Financial income and expenses(105)(87)

Earnings per share

The computation of earnings per share (EPS) is presented in the following table:
For the three months ended
April 3, 2022April 4, 2021
Net income (loss)666 364 
Less: net income (loss) attributable to non-controlling interests9 11 
Net income (loss) attributable to stockholders657 353 
Weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)263,089 277,526 
Plus incremental shares from assumed conversion of:
Options 1)
321 416 
Restricted Share Units, Performance Share Units and Equity Rights 2)
1,699 5,321 
Dilutive potential common shares2,020 5,737 
Adjusted weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)265,109 283,263 
EPS attributable to stockholders in $:
Basic net income (loss)2.50 1.27 
Diluted net income (loss)2.48 1.25 
1)    There were no stock options to purchase shares of NXP’s common stock that were outstanding in Q1 2022 (Q1 2021: no shares) that 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 were greater than the weighted average number of shares underlying outstanding stock options.
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2)    There were 0.2 million unvested RSUs, PSUs and equity rights that were outstanding in Q1 2022 (Q1 2021: no shares) that 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 were greater than the weighted average number of outstanding unvested RSUs, PSUs and equity rights or the performance goal has not been met yet.

Balance Sheet Information

Cash and cash equivalents

At April 3, 2022 and December 31, 2021, our cash balance was $2,683 million and $2,830 million, respectively, of which $185 million and $208 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.
Inventories

The portion of finished goods stored at customer locations under consignment amounted to $9 million as of April 3, 2022 (December 31, 2021: $12 million).

Inventories are summarized as follows:
April 3, 2022December 31, 2021
Raw materials118 107 
Work in process974 846 
Finished goods219 236 
1,311 1,189 
The amounts recorded above are net of allowance for obsolescence of $121 million as of April 3, 2022 (December 31, 2021: $120 million).

Equity Investments

At April 3, 2022 and December 31, 2021, the total carrying value of investments in equity securities is summarized as follows:
April 3, 2022December 31, 2021
Marketable equity securities17 18 
Non-marketable equity securities11 19 
Equity-accounted investments89 75 
117 112 

The total carrying value of investments in equity-accounted investees is summarized as follows:
April 3, 2022December 31, 2021
Shareholding %AmountShareholding %Amount
Wise Road Industry Investment Fund I, L.P.8.41 %43 8.41 %31 
Others 46  44 
89 75 

Results related to equity-accounted investees at the end of each period were as follows:
For the three months ended
April 3, 2022April 4, 2021
Company’s share in income (loss)11 (1)
Other results1  
12 (1)

Other current liabilities

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Other current liabilities at April 3, 2022 and December 31, 2021 consisted of the following:
April 3, 2022December 31, 2021
Accrued compensation and benefits537 476 
Income taxes payable100 82 
Dividend payable222 149 
Other601 468 
1,460 1,175 

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, 2021207  (159)48 
Other comprehensive income (loss) before
   reclassifications
(18)(6) (24)
Amounts reclassified out of accumulated other
   comprehensive income (loss)
 1  1 
Tax effects 1  1 
Other comprehensive income (loss)(18)(4) (22)
As of April 3, 2022189 (4)(159)26 

Cash dividends

The following dividends were declared during the first quarters of 2022 and 2021 under NXP’s quarterly dividend program:

Fiscal year 2022Fiscal year 2021
Dividend per shareAmountDividend per shareAmount
First quarter0.845 222 0.5625 155 
The dividend declared in the first quarter (not yet paid) is classified in the condensed consolidated balance sheet in other current liabilities as of April 3, 2022 and was subsequently paid on April 6, 2022.


5 Restructuring

At each reporting date, we evaluate our restructuring liabilities, which consist primarily of termination benefits, to ensure that our accruals are still appropriate.

The following table presents the changes in restructuring liabilities in 2022:
As of January 1, 2022AdditionsUtilizedReleasedOther
changes
As of April 3, 2022
Restructuring liabilities37  (5)(1)(1)30 

There were no restructuring costs incurred for the three month period ended April 3, 2022 and the utilization of the restructuring liabilities mainly reflects the execution of ongoing restructuring programs the Company initiated in earlier years (April 4, 2021: no restructuring costs incurred).

These restructuring charges recorded in operating income, for the periods indicated, are included in the following line items in the statement of operations:
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For the three months ended
April 3, 2022April 4, 2021
Cost of revenue  
Research and development(1) 
Selling, general and administrative  
Net restructuring charges(1) 

6 Income Taxes

Benefit/provision for income taxes:
For the three months ended
April 3, 2022April 4, 2021
Tax expense (benefit)114 40 
Effective tax rate14.8 %9.9 %

Our provision for income taxes for the first three months of 2022 was of $114 million (14.8% effective tax rate) compared to a provision from income taxes of $40 million (9.9% effective tax rate) for the first three months of 2021. The increase in the income tax expense was due to higher income before income taxes as a result of the improved operational performance of the company which was partly offset by an increase in tax incentives also taking into account the effect of specific US tax law that became effective as from 2022. In addition to this, in the first three months of 2021 there was an income tax benefit due to changes in estimates of prior positions and due to a net change in the valuation allowance.

The Company benefits from income tax incentives in certain jurisdictions which provide that we pay reduced income taxes in those jurisdictions for a fixed period of time that varies depending on the jurisdiction. The predominant income tax holiday is expected to expire at the end of 2026. The impact of this tax holiday decreased foreign income taxes for the first quarter of 2022 by $3 million and decreased by $4 million for the first quarter 2021. The benefit of this tax holiday on net income per share (diluted) was $0.01 for the first quarter of 2022 and $0.01 for the first quarter of 2021.
7 Identified Intangible Assets

Identified intangible assets as of April 3, 2022 and December 31, 2021, respectively, were composed of the following:
April 3, 2022December 31, 2021
Gross carrying
amount
Accumulated
amortization
Gross carrying
amount
Accumulated
amortization
In-process R&D (IPR&D) 1)
53  96 — 
Marketing-related  81 (81)
Customer-related851 (336)852 (325)
Technology-based3,732 (2,723)3,686 (2,615)
Identified intangible assets4,636 (3,059)4,715 (3,021)
(1)  IPR&D is not subject to amortization until completion or abandonment of the associated research and development effort.

The estimated amortization expense for these identified intangible assets for each of the five succeeding years is:
2022 (remaining) 457 
2023397 
2024212 
2025113 
202668 
Thereafter330 
All intangible assets, excluding IPR&D and goodwill, are subject to amortization and have no assumed residual value.

The expected weighted average remaining life of identified intangibles is 4 years as of April 3, 2022 (December 31, 2021: 4 years).

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8 Debt

The following table summarizes the outstanding debt as of April 3, 2022 and December 31, 2021:
April 3, 2022December 31, 2021
MaturitiesAmountInterest
rate
AmountInterest
rate
Fixed-rate 4.625% senior unsecured notes
Jun, 2023900 4.625 900 4.625 
Fixed-rate 4.875% senior unsecured notes
Mar, 20241,000 4.875 1,000 4.875 
Fixed-rate 2.7% senior unsecured notes
May, 2025500 2.700 500 2.700 
Fixed-rate 5.35% senior unsecured notes
Mar, 2026500 5.350 500 5.350 
Fixed-rate 3.875% senior unsecured notes
Jun, 2026750 3.875 750 3.875 
Fixed-rate 3.15% senior unsecured notes
May, 2027500 3.150 500 3.150 
Fixed-rate 5.55% senior unsecured notes
Dec, 2028500 5.550 500 5.550 
Fixed-rate 4.3% senior unsecured notes
Jun, 20291,000 4.300 1,000 4.300 
Fixed-rate 3.4% senior unsecured notes
May, 20301,000 3.400 1,000 3.400 
Fixed-rate 2.5% senior unsecured notes
May, 20311,000 2.500 1,000 2.500 
Fixed-rate 2.65% senior unsecured notes
Feb, 20321,000 2.650 1,000 2.650 
Fixed-rate 3.25% senior unsecured notes
May, 20411,000 3.250 1,000 3.250 
Fixed-rate 3.125% senior unsecured notes
Feb, 2042500 3.125 500 3.125 
Fixed-rate 3.25% senior unsecured notes
Nov, 2051500 3.250 500 3.250 
Floating-rate revolving credit facility (RCF)Jun, 2024    
Total principal10,650 10,650 
Unamortized discounts, premiums and debt
   issuance costs
(77)(78)
Total debt, including unamortized discounts,
   premiums, debt issuance costs and fair value
  adjustments
10,573 10,572 
Current portion of long-term debt  
Long-term debt10,573 10,572 


9 Related-Party Transactions

The Company's related parties are the members of the board of directors of NXP Semiconductors N.V., the executive officers of NXP Semiconductors N.V. and equity-accounted investees.

The following table presents the amounts related to revenue and other income and purchase of goods and services incurred in transactions with these related parties:
For the three months ended
April 3, 2022April 4, 2021
Revenue and other income3 2 
Purchase of goods and services1 1 

The following table presents the amounts related to receivable and payable balances with these related parties:
April 3, 2022December 31, 2021
Receivables1 1 
Payables3 3 

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10 Fair Value Measurements

The following table summarizes the estimated fair value of our financial instruments which are measured at fair value on a recurring basis:
Estimated fair value
Fair value
hierarchy
April 3, 2022December 31, 2021
Assets:
Money market funds11,763 2,111 
Marketable equity securities117 18 
Derivative instruments-assets29 5 
Liabilities:
Derivative instruments-liabilities2(8)(3)

The following methods and assumptions were used to estimate the fair value of financial instruments:

Assets and liabilities measured at fair value on a recurring basis
Investments in money market funds (as part of our cash and cash equivalents) and marketable equity securities (as part of other non-current assets) have fair value measurements which are all based on quoted prices in active markets for identical assets or liabilities. For derivatives (as part of other current assets or accrued liabilities) the fair value is based upon significant other observable inputs depending on the nature of the derivative.

Assets and liabilities recorded at fair value on a non-recurring basis
We measure and record our non-marketable equity securities, equity method investments and non-financial assets, such as intangible assets and property, plant and equipment, at fair value when an impairment charge is required.

Assets and liabilities not recorded at fair value on a recurring basis
Financial instruments not recorded at fair value on a recurring basis include non-marketable equity securities and equity method investments that have not been remeasured or impaired in the current period and debt.

As of April 3, 2022, the estimated fair value of current and non-current debt was $10.3 billion ($11.3 billion as of December 31, 2021). The fair value is estimated on the basis of broker-dealer quotes, which are Level 2 inputs. Accrued interest is included under accrued liabilities and not within the carrying amount or estimated fair value of debt.

11 Commitments and Contingencies

Purchase Commitments
The Company maintains purchase commitments with certain suppliers, primarily for raw materials, semi-finished goods and manufacturing services and for some non-production items. Purchase commitments for inventory materials are generally restricted to a forecasted time-horizon as mutually agreed upon between the parties. This forecasted time-horizon can vary for different suppliers. As of April 3, 2022, the Company had purchase commitments of $3,925 million, which are due through 2044. Our long-term obligations increased substantially in 2021 as we locked in long-term supply with our key manufacturing partners.

Litigation
We are regularly involved as plaintiffs or defendants in claims and litigation relating to a variety of matters such as contractual disputes, personal injury claims, employee grievances and intellectual property litigation. In addition, our acquisitions, divestments and financial transactions sometimes result in, or are followed by, claims or litigation. Some of these claims may possibly be recovered from insurance reimbursements. Although the ultimate disposition of asserted claims cannot be predicted with certainty, it is our belief that the outcome of any such claims, either individually or on a combined basis, will not have a material adverse effect on our consolidated financial position. However, such outcomes may be material to our condensed consolidated statement of operations for a particular period. The Company records an accrual for any claim that arises whenever it considers that it is probable that it is exposed to a loss contingency and the amount of the loss contingency can be reasonably estimated. The Company does not record a gain contingency until the period in which all contingencies are resolved and the gain is realized or realizable. Legal fees are expensed when incurred.

Based on the most current information available to it and based on its best estimate, the Company also reevaluates at least on a quarterly basis the claims that have arisen to determine whether any new accruals need to be made or whether any accruals made need to be adjusted. Based on the procedures described above, the Company has an aggregate amount of $61 million accrued for potential and current legal proceedings pending as of April 3, 2022, compared to $65 million accrued at December 31, 2021 (without reduction for any related insurance reimbursements). The accruals are included in “Other current liabilities” and “Other non-current liabilities”. As of April 3, 2022, the Company’s related balance of insurance reimbursements was $45 million (December 31, 2021: $46 million) and is included in “Other current assets” and “Other non-current assets”.
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The Company also estimates the aggregate range of reasonably possible losses in excess of the amount accrued based on currently available information for those cases for which such estimate can be made. The estimated aggregate range requires significant judgment, given the varying stages of the proceedings, the existence of multiple defendants (including the Company) in such claims whose share of liability has yet to be determined, the numerous yet-unresolved issues in many of the claims, and the attendant uncertainty of the various potential outcomes of such claims. Accordingly, the Company’s estimate will change from time to time, and actual losses may be more than the current estimate. As at April 3, 2022, the Company believes that for all litigation pending its potential aggregate exposure to loss in excess of the amount accrued (without reduction for any amounts that may possibly be recovered under insurance programs) could range between $0 and $63 million. Based upon our past experience with these matters, the Company would expect to receive additional insurance reimbursement of up to $49 million on certain of these claims that would partially offset the potential aggregate exposure to loss in excess of the amount accrued.

In addition, the Company is currently assisting Motorola in the defense of personal injury lawsuits due to indemnity obligations included in the agreement that separated Freescale from Motorola in 2004. The multi-plaintiff Motorola lawsuits are pending in the Circuit Court of Cook County, Illinois. These claims allege a link between working in semiconductor manufacturing clean room facilities and birth defects in 17 individuals. The Motorola suits allege exposures between 1981 and 2006. Each claim seeks an unspecified amount of damages for the alleged injuries; however, legal counsel representing the plaintiffs has indicated they will seek substantial compensatory and punitive damages from Motorola for the entire inventory of claims which, if proven and recovered, the Company considers to be material. A portion of any indemnity due to Motorola will be reimbursed to NXP if Motorola receives an indemnification payment from its insurance coverage. Motorola has potential insurance coverage for many of the years indicated above, but with differing types and levels of coverage, self-insurance retention amounts and deductibles. We are in discussions with Motorola and their insurers regarding the availability of applicable insurance coverage for each of the individual cases. Motorola and NXP have denied liability for these alleged injuries based on numerous defenses.




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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

This interim Management’s Discussion and Analysis ("MD&A") should be read in conjunction with our consolidated financial statements and notes and the MD&A in our Annual Report on Form 10-K for the year ended December 31, 2021. This discussion contains forward-looking statements that involve a number of risks and uncertainties, including any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, uncertain events or assumptions, and other characterizations of future events or circumstances, including the expected timeline to remediate the identified material weakness in our internal control over financial reporting, the uncertain nature, magnitude, and duration of hostilities stemming from Russia's recent military invasion of the Ukraine, and our response to the current global pandemic and the potential impact the pandemic will have on our operations, liquidity, customers, facilities and supply chain. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing, and in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K. Our actual results may differ materially from those contained in any forward-looking statements. We undertake no obligation to update any forward-looking statement to reflect subsequent events or circumstances.

Our MD&A is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. MD&A is organized as follows:
Overview - Overall analysis of financial and other highlights to provide context for the MD&A
Results of Operations - An analysis of our financial results
Liquidity and Capital Resources - An analysis of changes in our balance sheets and cash flows
Information Regarding Guarantors of NXP - Financial information of the Obligor Group on a combined basis

Overview
($ in millions, unless otherwise stated)Q1 2022Q1 2021
Revenue3,1362,567 
Gross profit1,7771,355 
Operating income (loss)873 492 
Cash flow from operating activities856732
Total debt10,5737,611
Net debt7,8905,769 
Diluted weighted average number of shares outstanding265,109 283,263 
Diluted net income per share2.481.25 
Dividends per common share0.84500.5625 

Q1 2022 compared to Q1 2021
Revenue for the three months ended April 3, 2022 was $3,136 million compared to $2,567 million for the three months ended April 4, 2021, an increase of $569 million or an increase of 22% year-on-year. The strong revenue growth during the quarter was primarily due to ongoing industry-wide demand for semiconductors in the company’s focused end markets, as well as positive mix effects within the company’s focused end markets, and increased volumes of products shipped. Additionally, the company continued to experience the effects of increased input costs from its suppliers which were passed along to end customers in the form of higher average selling prices.

Our gross profit percentage for the first quarter of 2022 increased from 52.8% in the first quarter of 2021 to 56.7%, primarily from the continued significant acceleration of revenue in the first quarter of 2022 when compared to the same period in 2021, which led to improved loading and cost reductions, combined with sales price increases due to shortage and high demand, partly offset by higher input costs.

We continue to generate strong operating cash flows, with $856 million in cash flows from operations for the first quarter of 2022. We returned $701 million to our shareholders during the first quarter of 2022. Our cash position at the end of the first quarter of 2022 was $2,683 million. On January 31, 2022, the NXP Board of Directors approved a 50% increase in the quarterly cash dividend to $0.845 per common share for the first quarter of 2022.


14


Results of operations

The following table presents operating income for each of the three month periods ended April 3, 2022 and April 4, 2021, respectively:

($ in millions, unless otherwise stated)Q1 2022Q1 2021
Revenue3,1362,567 
% nominal growth22.2 27.0 
Gross profit1,7771,355 
Research and development(518)(461)
Selling, general and administrative(251)(222)
Amortization of acquisition-related intangible assets(135)(180)
Other income (expense)— 
Operating income (loss)873 492 

Revenue
Q1 2022 compared to Q1 2021
Revenue for the three months ended April 3, 2022 was $3,136 million compared to $2,567 million for the three months ended April 4, 2021, an increase of $569 million or an increase of 22% year-on-year, with growth in all of the Company’s four focus end markets.

Revenue by end-market was as follows:
($ in millions, unless otherwise stated)Q1 2022Q1 2021Change
Automotive1,557 1,229 26.7 %
Industrial & IoT682 571 19.4 %
Mobile401 346 15.9 %
Communication Infrastructure & Other496 421 17.8 %
Revenue3,136 2,567 22.2 %

Revenue by sales channel was as follows:
($ in millions, unless otherwise stated)Q1 2022Q1 2021Change
Distributors1,680 1,468 14.4 %
OEM/EMS1,412 1,064 32.7 %
Other44 35 25.7 %
Revenue3,136 2,567 22.2 %


Revenue by geographic region, which is based on the customer’s shipped-to location was as follows:
($ in millions, unless otherwise stated)Q1 2022Q1 2021Change
Greater China and Asia Pacific1,700 1,482 14.7 %
EMEA (Europe, the Middle East and Africa)638 467 36.6 %
Americas432 321 34.6 %
Japan218 189 15.3 %
South Korea148 108 37.0 %
Revenue3,136 2,567 22.2 %
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