Freescale is the old chip giant that was acquired by a private equity group led by The Blackstone Group (NYSE: BX), The Carlyle Group, and Permira Advisers. Prior to being public, this was a unit of Motorola Inc. (NYSE: MOT).
The company still has to report earnings as though it was a public company because of its ratings and because of its public debt. The company has shown that over the last twelve months, the company's adjusted EBITDA was $1.55 billion.
Net sales for Q1-2008 were $1.405 billion, up from $1.361 Billion in Q1-2007 and down from $1,539 billion in Q4-2007. Unfortunately, the company is still posting an operating loss of $152 million for the quarter, compared to $654 million in operating losses in Q1-2007 and $595 million in Q4-2007. The net loss after items for this last quarter was $245 million, also down from a loss of $539 million in Q1-2007 and down from a loss of $525 million in Q4-2007.
Its cash and total short term investments were $1.25 billion on March 28, 2008, compared to $751 million at the fourth quarter ending December 31, 2007; and its accounts receivable were $680 million and inventory was $732 million. But here is where things get tricky. Its long-term debt is $over $9.3 billion alone. Of the company's total asset base of $15.197 billion, more than $5.3 billion is goodwill and more than $3.6 billion was listed as intangible assets.
If you go back to the BloggingBuyouts article, "Why private equity firms avoid technology companies," you'll see that being a highly leveraged technology company that requires high capital expenditures isn't always the greatest place to be be. Unfortunately for all the private equity partnersm the company can't live on EBITDA alone and many believe that Freescale will need more capital and thus more leverage.
The original private equity deal was put at $17.6 billion for an enterprise value. So far that isn't turning out too great. Who knows, maybe a re-IPO of Freescale isn't too far off.
Jon Ogg is a producer and editor of the Special Situation newsletter for 247WallSt.com.
Freescale earnings show more private equity tech pains
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