恩智浦 (NXPI) 2011 Q4 法說會逐字稿

Good evening, ladies and gentlemen, and welcome to the fourth quarter and full-year 2011 NXP Semiconductors earnings conference call.

My name is Chris and I will be your conference moderator for today.

(Operator Instructions).

As a reminder, this conference is being recorded for replay purposes.

At this time, I would now like to turn the conference over to your presenter for today, Jeff Palmer.

Sir, you may proceed.

Thank you, Chris, and good afternoon, everyone.

Welcome to the NXP Semiconductors fourth quarter and full-year 2011 earnings call.

With me on the call today is Rick Clemmer, NXP's President and CEO, and [Karli] Sundstrom, our CFO.

If you've not obtained a copy of our fourth quarter 2011 earnings press release, it can be found at our Company website under the Investor Relations section at nxp.com.

Additionally, we have posted a supplemental earnings summary presentation and an Excel document of our historical financials to assist in your modeling efforts.

This call is being recorded and will be available for replay from our corporate website.

Please be reminded that this call will include forward-looking statements that involve risks and uncertainties that could cause NXP's results to differ materially from management's current expectations.

The risks and uncertainties include, but are not limited to, statements regarding the macroeconomic impact on the specific end markets in which we operate, the impact of foreign exchange rates, the sale of new and existing products, and our expectation for financial results for the first quarter of 2012.

Please be reminded that NXP undertakes no obligation to revise or update publicly any forward-looking statements.

For a full disclosure of forward-looking statements, please refer to our press release.

Additionally, during our call today we will make reference to certain non-GAAP financial measures, which exclude the impact of purchase price accounting, restructuring, impairment, and other charges that are driven primarily by discrete events that management does not consider to be directly related to NXP's underlying core operating performance.

Pursuant to Regulation G, NXP has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our fourth quarter 2011 earnings press release, which will be furnished to the SEC on Form 6-K and is available on NXP's website in the Investor Relations section at nxp.com.

Now, I'd like to turn the call over to Rick.

Thanks, Jeff, and I'd like to welcome everyone to our earnings call tonight.

Before I review the results for fourth quarter, I'd like to first take a moment to highlight the achievements that NXP has made in 2011, our first full year as a public company.

At the time of the IPO, we presented our vision of NXP as a company which could substantially outgrow its immediate peer group, due to our company-specific design wins in areas of unique differentiation.

We laid out a plan to deliver operational improvements that would result in improved margin structure.

Finally, we committed to de-lever our capital structure and lower the associated expenses.

Now, let me cover our actual performance through these objectives.

First, we delivered product revenue for $3.8 billion, an increase of nearly 4% year over year, outpacing the revenue growth of our comparable peer group companies by over 3X or 300%.

Secondly, we made good progress on our margin expansion goals, as we focused to lower manufacturing cost and align our operating expenses.

The result is, we achieved a 6% improvement in non-GAAP gross profit or just over 47% gross margin, nearly a 500 basis point improvement versus the prior year.

Additionally, we delivered an 18% improvement in non-GAAP operating profit or just over a 19% operating margin, nearly 400% basis points of annual improvement.

Lastly, we significantly improved our capital structure, as net debt declined by $597 million or 16% versus 2010 and we considerable de-risked our short-term maturity profile through refinancing actions related to our 2013 maturities.

Taken together, we delivered to shareholders a 45% improvement in non-GAAP net income, the equivalent of $1.70 of EPS.

We achieved these results despite the significant industry inventory correction during the second half of 2011.

Now, I'd like to turn to our results for the fourth quarter.

During the fourth quarter, NXP delivered revenue of $931 million, in line with the midpoint of our original guidance.

I will focus on the performance of our businesses and end-market trends we are seeing, with Karli providing the details of the financial results.

From a segment perspective, HPMS revenue was $659 million, in line with the midpoint of our guidance.

However, the quarter played out somewhat differently than we had originally anticipated.

Within our Automotive business, revenue was $218 million, down about 2%, below our original expectations.

The largest direct on the results, relative to our guidance, was the disruption due to the flooding in Thailand and, to a lesser degree, a more aggressive stance on inventory control by our automotive customers heading into the year end.

Geographically, our Automotive business was impacted by weaker-then-anticipated European auto production and incremental slowing in the Chinese automotive market.

This was positively offset by a rebound in the Japanese auto production and a firming of US auto production.

From an NXP Product perspective, we experienced better-than-anticipated demand for our entertainment system products, driven by the rebound in Japan auto supply chain, while the remainder of the portfolio was directly impacted by the flooding in Thailand.

Within our Identification business, revenue was $155 million, down 3% sequentially, but substantially better than our original expectations.

We experienced improved order trends across the entire portfolio, with strong growth in our core markets of e-government and tags and labels due to new program launches, as well as a generally improved -- improving demand environment after the slowdown experienced in the third quarter.

Also during the quarter, Mobile Transaction products increased by over 30% sequentially.

Overall, 2011 was a breakout year for our Mobile Transactions Group, as revenue grew over 70% year on year.

We believe the year ended with the overall industry achieving about a 10% attach rate of NFC solutions to the 445 million smart phones shipped in 2011, albeit below our original expectations of about a 16% attach rate.

We continued to experience strong customer adoption across the entire Mobile Transaction ecosystem, including handset and computing OEMs, point of sale vendors, and other key players, including the major payment network providers.

We continue to believe that NXP has the most comprehensive portfolio of solutions in the secure identification space and we're continuing to move the goalposts in terms of advanced technology and solutions.

Additionally, our customers and partners consistently give us high marks for our depth of real-world applications knowledge in this space, gained through 10 years of successful experience in the secure identification marketplace.

Our NFC design win momentum continues to build and we have now recognized over 130 unique handset and tablet design wins.

We are cautiously optimistic 2012 will see another significant step up in the mobile transactions market for NXP.

Moving to our Wireless Lighting and Industrial business, revenue was $122 million, down 23% sequentially and slightly worse than we had anticipated.

The biggest shortfall was worse-than-expected demand for our MCU products through the distribution channel.

We viewed this as a short-term inventory correction and not end-market share loss.

Sales of our high-performance RF products, primarily for the cellular base station market, declined but were essentially in line with our expectations.

Lastly, demand for our lighting driver products was impacted by supply chain disruptions due to the Thailand flooding.

Turning to our Mobile, Consumer and Computing business, revenue was $164 million, down 11%, better than we had originally expected.

We experienced improving demand for our interface products, primarily as production in Japan began to normalize.

Additionally, demand for our silicon tuner products improved, driven by US-based CMTS customers, as well as China-based TV manufacturers.

Within our logic business, demand was better than planned, especially for our very small footprint PicoGate and MicroPak devices.

However, we were not immune to the disruptions in the global PC supply chain caused by the Thai flooding, which impacted sales of our GreenChip power adapter devices.

Finally, turning to our Standard Products business, revenue was $198 million, down 19% sequentially, just slightly worse than anticipated.

From a channel perspective, nearly all the weakness we experienced during the quarter related to sales through our distribution channel partners, with MCU and Standard Products being particularly affected.

We saw sales into distribution drop by approximately 17%, while sell-through out of distribution was essentially flat from last quarter.

Total months of supply on hand at our distribution partners declined to 2.4 months from 2.7 months in the third quarter, although there remained the typical mix across the portfolio, with inventory levels lower in some businesses and higher in other areas.

However, absolute dollars of inventory in the channel declined 12% as our channel partners continued to rationalize their on-hand inventory positions.

Geographically, we saw strong demand in Japan, Korea, and Southeast Asia, which collectively grew sales by over 20% sequentially and represented about a third of our total product revenue during the quarter.

However, sales in Greater China, Europe, and the US were all weaker.

Looking forward, we cautiously optimistic that our customers and channel partners have made major progress in the process of aligning their on-hand inventory to true end-market demand.

While the broader macro environment continues to be uncertain, we are encouraged by the somewhat improved order rate so far into the current quarter.

Additionally, several NXP-specific design win opportunities across our entire product portfolio are coming into clearer focus, which should enable the Company to outperform the market growth in 2012, again in excess of our peer group, as we did in 2011.

Now, I'd like to turn the call over to Karli to discuss the financial details of the quarter.

Thank you, Rick, and good afternoon to everyone on the call.

As Rick has already covered the drivers of the revenue during the quarter, I will move directly to the highlights of the P&L.

During Q4, revenue was $939 million, essentially in line with the midpoint of our original guidance.

We generated $423 million in non-GAAP gross profit, about $11 million better than we originally anticipated.

This resulted in a better-than-anticipated non-GAAP gross margin of 45.4%, although a 290 basis point sequential decline from Q3.

Let me help bridge the change at the gross profit versus the prior quarter.

First, we realized a positive impact to gross profit of nearly $3 million due to several new cost-savings actions outside the formal Redesign programs.

These include $11 million in bonus releases and other discrete cost reduction efforts that had a positive impact on gross profit during the quarter.

However, this benefit was offset by about $8 million related to negative impact from the Thai floods and slightly worse product mix.

Secondly, gross profit was negatively impacted about $68 million as a result of lower revenue in Q4, which was down $129 million, sequentially.

However, included in both revenue and gross profit was the benefit from a few million dollars in IP revenue, lower than in Q3.

Third, we experienced about a $30 million negative impact due to lower factory utilization in Q3, although favorable to our original guidance.

As a reminder, in our cost accounting system, the effect of the under- or over-absorption of fixed costs are recognized, essentially, one quarter later, which is our average manufacturing cycle time.

During Q3, our average utilization was 79%, 15 points lower than in Q2.

Lastly, we realized a $6 million positive impact to gross profit in Q4 due to the Redesign program, mainly in our HPMS segment.

Since the start of the program, we have realized a total annualized savings of $928 million, just above the midpoint of our original expectation.

The end of 2011 brings to a close the formal Redesign program we began in 2008.

I want to extend my thanks to our team, who diligently focused on making the Redesign program a real success.

While the Redesign program is completed, we will continue to aggressively look to lower costs and expenses as is normal with any many semiconductor supplier.

Turning to the operating segments, within the HPMS segment, non-GAAP gross profit of $345 million, a gross margin of 54.2%, a 410 basis point decline versus the prior quarter due to the items previously discussed.

Within our Standard Product segment, non-GAAP gross profit was $72 million or 36.4% of revenue, a 50 basis point sequential decline, mainly driven by lower average revenue and lower gross profit fall-through and, to a lesser degree, offset by the discrete items discussed previously.

Total operating expenses were $277 million, down $28 million on a sequential basis.

We achieved total expense savings in the quarter of $36 million related to Redesign savings, bonus releases and several discrete items.

However, these savings were offset by higher-than-anticipated legal expenses and stock-based compensation.

From an operating profit perspective, total non-GAAP operating profit was $148 million or 15.9%.

This was near the high end of our original guidance.

Interest expenses were $74 million, slightly higher than anticipated due to the financing transactions undertaken in Q4.

While non-controlling interest was $9 million, SSMC utilization rates were higher than anticipated.

Taken together, total NXP non-GAAP earnings per share were $0.24, in line with our guidance.

Now, I would like to turn to the changes in our cash and debt.

Cash at the end of Q4, $743 million, a sequential decline of $122 million.

Total debt was $3.79 billion, a sequential decline of $22 million, primarily due to exchange effects on our euro-denominated debt.

Taken together, our total net debt at the end of Q4 was $3.05 billion, a decline of $597 million from the year-ago period.

During Q4, we completed two debt transactions, which have substantially de-risked our short-term debt maturity profile.

The first was the private transaction we discussed on our last call and the other a $500 million term loan due 2017.

Taken together, we were able to push out $988 million of 2013 floating-rate notes to 2016 and 2017.

We exited the quarter with a trailing 12-month adjusted EBITDA of $1.09 billion, a 7% improvement versus the year-ago period.

Taken together, our ratio of net debt to trailing 12-month adjusted EBITDA was 2.8 times.

Turning to the balance sheet, days of inventory was 104 days, up 7 days.

However, actual inventory dollars only increased $8 million.

Days receivables were 43 days, up 8 days sequentially as we experienced higher sales during the month of December.

Days payable were 77, down 8 days sequentially, mainly as a result of lower factory utilization.

Taken together, our cash conversion cycle spiked up to 71 days from 48 days in the prior quarter.

Cash flow from operations was negative $34 million as a result of lower sales, higher working capital requirements and the impact on the restructuring action noted in the earnings release.

Net CapEx investment during the quarter $40 million, resulting in a negative free cash flow of $74 million.

I view the cash flow result delivered in Q4 as a temporary (inaudible).

As our business improves, along with higher utilization, NXP will again generate solid cash-flow metrics.

Now, I would like to provide our outlook for Q1.

As Rick mentioned, we believe our customers and channel partners have substantially completed a process of aligning their on-hand inventory to end market demand.

Furthermore, we have begun to experience somewhat improving booking trends, which gives us cautious confidence that the worst of the inventory correction is behind us.

With these views as a backdrop, we currently anticipate product revenue will be in the range of flat to up 7% sequentially.

At the midpoint, we expect product revenue to be up about 4% sequentially in Q1, reflecting the following trends in the business.

Automotive is expected to be up in the mid-single-digit-percentage-point range.

Identification is expected to be up in the low-double-digit-percentage-point range.

Wireless, Lighting, and Industrial is expected to be up in the mid-single-digit-percentage-point range.

Mobile, Consumer, and Computing are expected to be down in the low-single-digit-percentage-point range.

Standard Products is expected to be down in the low-single-digit-percentage-point range.

We anticipate revenue from the combination of our Manufacturing, Corporate, and Other segment to be approximately $66 million.

Taken together, total NXP revenue should be flat to up roughly 6%.

Additional input to help tune your models are as follows.

We anticipate non-GAAP gross profit to be in the range of approximately $408 million to $443 million.

As I previously mentioned, in our cost accounting system, the effects of under- or over-absorption due to factory utilization are offset by about one quarter.

During Q4, utilization was 71%, about 8 points lower than in Q3.

Due to the under-absorption of fixed costs we will experience about a $17 million adverse effect to gross profit in Q1 relative to Q4.

The remaining positive difference in gross profit is due to improved revenue growth, potential cost-saving efforts, and discrete items.

We anticipate operating expenses in Q1 to be approximately $289 million.

The sequential increase is primarily due to the previously anticipated re-accrual of certain expenses.

In addition, we plan to make modest investments in several new customer programs, as well as expenses related to (inaudible) for products about to launch.

Taken together, this should translate into non-GAAP operating profit in the range of about $121 million to $156 million.

Net interest expenses should be around $76 million.

Cash tax expense should be about $9 million and non-controlling interest should be about $11 million, plus or minus $1 million as utilization of SSMC improves.

Average diluted share count should be about 251 million shares.

Taken together, our guidance implies a non-GAAP EPS in the range of $0.11 to $0.24 per share, or approximately $0.17 per share at the midpoint of our guidance range.

Now, we would like to turn to your questions.

Chris, would you poll for questions, please?

Thank you.

(Operator Instructions).

And our first question comes from the line of John Pitzer with Credit Suisse.

You may proceed.

Yes, good afternoon, guys.

Thanks for letting me ask the questions.

I guess, Rick, my first question, relative to the revenue guidance for the March quarter, you went through kind of the individual buckets.

I'm kind of curious on the ID business being up low-double-digits sequentially.

How much of this is an indication of the base business growing versus kind of new product cycles kicking in around NFC?

So, John, it's a combination of both.

We experienced, as you know, some weak demand in Q3 and Q4, although not quite as much in Q4 as we had originally anticipated.

And what we've seen is a rebound in the demand of the core business, as well as on the mobile transaction side.

We definitely believe that 2012 will be a very solid year for NFC and be a proof point associated with it.

But the core business has also improved significantly and gives us the confidence and allows us to really differentiate ourselves versus the rest of the semiconductor industry in growth in first quarter of 2012.

Rick, you talked about a 10% attach rate for 2012 on smart phones with NFC.

What kind of range can you give us for this year?

It's going to be higher.

I mean, it's clear going to grow significantly.

We learned our lesson last year that we're not going to get into the forecast business associated with the NFC attach rate, but, clearly, we have encouraging signs and encouraging order levels from a number of different customers, with over 130 different handsets and tablets that have designed in our NFC product.

And so we're beginning to see expectations and plans associated with those ramps.

We're diligently working through capacity requirements associated with it and we're encouraged throughout the outlook.

But we're going to try to avoid getting into the absolute forecasting business for NFC.

And then, guys, my last question, just, Karli, on the gross margins, I'm assuming with revenue growing sequentially in March, does utilization also pick up in the March quarter?

And to what approximate level if it is?

And can you just help us or remind me, for every 5 basis point move in utilization to the positive, what kind of gross margin --

As we said, utilization is going up and we don't guide on utilization, but it's going to go up.

And for every 5% up or down in utilization, you get an impact somewhere between $10 million to $15 million.

So, I think -- just to add to that, John -- we would anticipate clearly the IC utilization will definitely improve in Q1.

Probably the Standard Products not improving as much, but, clearly, we're encouraged about the factory loadings and the ability to ramp that and improve the profits associated with it.

Great.

Thanks, guys.

I appreciate it.

Thanks, John.

Thanks, John.

Our next question --

Chris, we'll take the next caller, please.

Our next question comes from the line of Mark Lipacis with Jefferies.

You may proceed.

Thanks for taking my question.

On the -- I missed what you said about the channel inventories, what they declined to and did you say what you expected your own inventories in the March quarter?

We didn't give a projection on our own inventories for the first quarter.

On the channel inventory, Mark, what we said was that our sales into distribution dropped by about 17% while the sell-through out of distribution was relatively flat.

So, what that did was, that reduced the absolute dollar inventory level in our distribution channel partners by about 12% and took us from the 2.7 months of inventory that we had at the end of Q3 down to the 2.4 months of inventory, which, by the way, is the same level that we had in the end of Q2.

Okay, fair enough.

And then, last question, the DSOs were up 8 days.

Is that a reflection of your orders, the orders from customers picking up at the end of the quarter?

Can you characterize how the orders trended through the quarter and into this last month?

Thank you.

So, what happened was that the sales came late.

The sales picked up, really, in the month of December in the turns business and that's the reason why we, like many other semiconductor players, got increased DSOs.

But don't, also, forget, Mark, that we had the impact of the Thai flooding, which had some impact on our revenue that pushed it out towards the end of the quarter, which increased our DSO, as well.

Fair enough.

Thank you very much.

Thanks a lot, Mark.

Our next question comes from the line of C.J.

Muse with Barclays Capital.

You may proceed.

Yes, good afternoon.

Thank you for taking my question.

I guess the first question I was hoping to dig a little bit deeper into the gross margin.

And considering, I guess, the product cycles that you're expecting through 2012 and you think about the design wins that you've talked about and, I guess, how you see them flowing through, how should we think about gross margin trajectory through the year?

Obviously, with improved utilization, the negative impact that we had in, especially both in Q3 and Q4 and also, now, having guided for Q1, will be reversed.

So, we get the same as I told you on the -- for every 5% increase in utilization, we will have a benefit of $10 million to $15 million.

And then that means we're going to come back with improved gross margins.

Okay.

I guess what I'm trying to get at is, from just a mix perspective, so less from utilization, how you see that trending in terms of high performance through the year and what kind of expectations you have in terms of benefiting margins?

So, clearly, if you look at it with the market environment we see in HPMS and the design wins we have, we'll see our HPMS business grow at a much higher rate than Standard Products and become an ever-increasing percentage of the total, which will have a favorable impact on our bottom-line gross margin.

So, we would anticipate seeing that throughout the year and, really, as Karli says, in our cost structure, the loading of our factories is a significant element associated with our profitability and we would anticipate that that would improve throughout the year.

And I would just add to that, Rick, is that in Q2, 3 and 4, the largest negative impact to our gross margin was due to utilization.

That's very helpful.

So, utilization -- as utilization improves and we continue to see a richer mix of HPMS products, you'll see a positive impact, positive tailwind to HPMS gross margins.

Do you have a follow up, C.J.?

Yes, as a quick follow up, in terms of disty channel inventory do you feel like 2.4 months is the right level, where you exited Q2, or do you think there's more room for that to drawn down and then I guess pick up beyond Q1?

Well, distribution inventory is always a topic of a lot of discussion.

The Arrows and Avnets would like to continue to focus on the turns and earns and they'd prefer that to be more like 2 months of inventory.

Clearly, for them to earn their margins, we'd like to be sure that it's in the 2 to 2.5 months of inventory level.

And we have some product areas, like in Standard Products, where it may get to 3 months of inventory.

So, it's an interesting topic, one that we spend a great deal of time with our distribution partners and trying to ensure that we work out the best approach to be able to support increased demand in the future through having adequate inventory available for them to supply the broad array of customer base they have.

So, I think we're pretty comfortable with the 2.4 months of inventory.

It's interesting, when you think about it, in Q3, when it went up to 2.7 months of inventory, the inventory dollars were flat.

It's just that the sell-through had gone down.

Now the sell-through was flat this quarter and we actually reduced the inventory, which allowed us to drive back down from the 2.7 months to the 2.4.

But, generally speaking, I think it's in a range of reasonable tolerance.

Arrow and Avnet would always tell you they want it to be lower, but we think it's not too far off of where it should be.

Thank you.

Thanks.

Thanks, C.J.

Our next question comes from the line of Vivek Arya with Bank of America.

You may proceed.

Thanks for taking my question.

So, Rick, very good Q1 sales outlook.

I'm just curious, how much of this do you think is out of a temporary restocking benefit versus more sustainable growth trends?

For instance, what is the nature of discussion with customers versus what you typically have during this part of the year?

So, I don't think that what we're seeing in Q1 is a lot of restocking, per se, because the distribution inventory levels, as we talked about, are at fairly reasonable levels.

What we clearly see is in the specific area of our ID business where we had seen some weakness in the second half of the year, a rebound associated with a number of different projects and some of our customers' inventory levels driving that.

So, I think that this is pretty fundamental demand.

It's not like a restocking process, per se, as we think the inventory levels, again, are pretty much okay.

(Inaudible).

Add to that, Vivek, in the second half -- in 2011 you had two really significant events that impacted our Auto business.

You had the tsunami and earthquake in Japan and then the Thai flooding, which clearly disrupted the Auto supply chain.

And I think as we enter into 2012, it'll normalize and we'll start to see it pick back up.

Got it.

And then secondly, on OpEx, I think you're expecting it to tick back up again in Q1.

I'm curious, why is it not declining faster with all the past restructuring actions that you have taken?

So, for instance, year-on-year sales are down over 11%, but OpEx is declining only 4%.

So, first of all, as we said on the call at Q3, of the reduction that we forecasted, half of that will come back in, because that was release of bonus releases and some one-time effects, which mean that we will continue to start to accrue and that's why we are guiding, now, basically with an increase on the midpoint of 14 up, which is basically going back to the normal accruals, as we have said.

And we were very specific on that when we released the Q3.

And we are having investments.

You all see we invested in a couple of areas, especially within both (inaudible), as well as in Identification.

Specifically in mobile transactions.

As we port our NFC capability to multiple platforms, it requires specific resources to be able to do that.

So, that investment that we're making, we think, will pay off with handsome dividends and we go forward over the next year and a half or so.

Got it.

And one last one, if I may.

How should we look at interest expenses for the remainder of the year?

Thank you.

Obviously, we have guided for the next quarter and our ambition is continue to reduce interest expenses.

Okay.

I think, Karli, in the past you had mentioned a range of around 240-ish or so, getting to, like, 60s or mid-60s on a quarterly basis.

Is that still possible as we go towards the second half of the year?

Yes, so what basically happened is that -- what we have done is that we did the two transactions in Q4, which basically increased our interest expenses annual with about $30 millions, when we de-risked the 2013 maturities and we haven't reduced any debt in Q4, which, basically, we missed a quarter.

So, I would say that for this year we would probably be around the area of $280 million to $270 million, with debt reduction coming in the coming quarters.

Understand.

Thank you very much.

Good luck.

Thanks, Vivek.

Our next question comes from the line of Vijay Rakesh with Sterne, Agee.

You may proceed.

Hi, Rick and Karli.

It looks like you took some good strategic steps here, kind of closing down a couple of fabs.

Can you outline how much capacity comes off with that and how that should help your fab utilization with those?

First off, we didn't shut those fabs down in Q1, we announced that we will be shutting those down in a year and a half or so.

So, it'll take us a significant period of time to actually execute those programs as we have Automotive customers and other customers that we have to be sure that we satisfy in that process.

So, we -- that won't have any near-term impact on our utilization.

The utilization will be driven by an increase in demand associated with our customer requirements.

And clearly, our SSMC fab in Singapore that we talked about, that we doubled our capacity last year from the previous year to be able to support the growth of our ID business and our ARM-based microcontroller business is our most significant workhorse facility.

And then our 8-inch facility in the Netherlands, as well.

So, the 4-inch and 6-inch have a nominal impact on factory utilization, but, again, it'd be well out in time, some four or five quarters from now.

Got it.

Okay and you look at the debt picture rolling over, you mentioned this year $270 million, $280 million, how do you see that as you look at the next years?

Are you looking at the 2015s already or not?

You're talking 2013?

Yes.

That will come down, because we will generate more cash.

We're going to take out debt.

If I could add, Karli, also, Vijay, we -- as Karli said, we feel we lost about a quarter in our originally stated plans toward that $240 million target.

So it's not like anything's changed strategically in the direction we're going.

So, probably, as you get into 2013, you clearly get near those metrics we've talked about in the past.

Yes, we made a strategic decision that with the difficult economic environment that we saw that we wanted to postpone some of that and specifically address our debts that were coming due in 2013.

We didn't feel uncomfortable with them, but we clearly felt like it put us in a more comfortable and secure capital structure position.

And so the ability to reduce that from $1.5 billion, $1.6 billion down to $500 million clearly puts us in the position that we'll generate with free cash flow well more than enough to be able to cover that.

Got it.

Good -- thanks a lot.

Good job, guys.

Thank you.

Our next question comes from the line of Jim Covello with Goldman Sachs.

You may proceed.

Great.

Good evening, guys.

Thank you so much for taking my question.

One big picture question, one kind of specific.

Maybe first on the specific, relative to pricing, could you tell us about, give us some incremental detail on pricing, both in the high-volume analog and then the Standard Products business?

So, I think in the high-volume analog we saw pricing be fairly normal.

We didn't see anything out of the ordinary, Jim.

Probably a little bit on the switches, a little more aggressive pricing, but not anything that was really significant.

Our Standard Products, in transistors and diodes as well as our power MOS business, we did see a resumption of price pressure with aggressive pricing.

So -- and we continue to see that.

So, clearly, that was a factor for us in Q4 and will be a factor for us in Q1.

That's helpful.

Thank you.

And then, kind of second question is sort of bigger picture.

I think we all believes, companies and Wall Street alike, that we're going to see a really nice semiconductor upturn over the next 12 to 18 months, because of the inventory draw-down and what-have-you.

As you've been through so many of these cycles before, what kinds of things do you think are going to make that happen and then what kinds of things do you worry about preventing that from happening or creating a slope that's not as robust as everybody expects or is hoping for?

Thanks.

Well, the things you always have to worry about is the fundamental economic environment and, clearly, there's still a great deal of economic uncertainty.

While I think the US has improved the economic outlook and the environment significantly over the last six to eight weeks, clearly in the case of Europe we haven't seen any improvement and we still have the significant issues on the Greece sovereign debt, which is a small factor relative to the total EC.

But, clearly, the most significant factor for us is Asia and specifically, China.

With some two-thirds of our sales being shipped into Asia, it's really important for us what takes place in China and I think we're still yet to see what happens with the -- what is it, the 12th Five-Year Plan that will be rolled out here in the next few weeks.

So, that's really probably the most significant factor in my mind on an overall economic viewpoint, Jim.

I think the real key issue for us, as we've talked about, is the design wins that we have with customers that will enable us to outgrow our peers in the industry and we think that we'll be able to demonstrate that much more robustly in 2012.

Really helpful perspective.

Thanks so much.

Thanks, Jim.

Our next question comes from the line of Sanjay Devgan with Morgan Stanley.

You may proceed.

Hi, guys.

Thank you for taking my question.

Rick, I just wanted to touch on your comments earlier.

You talked about 130, greater than 130 design wins in handsets and tablets with your NFC solutions.

I was wondering if you can put a percentage in terms of percentage won from a design-win perspective?

So, when you go head-to-head against the competitor, what share do you think you have on a percentage basis?

If you could lay that out, that'd be great.

Well, I know that there's probably six to eight that I'm aware of that we have not won, so, I would say, as I've been saying, that I think on the design wins that we have -- now, shipments sometimes play out differently, based on how that ramps up, but I would say on the design wins we feel very comfortable with the Intel-like market shares associated with the design-win basis.

We'll have to see how the volumes ramp up by each one of those individual users before we can see relative market shares.

But we feel very comfortable with our position.

We think that the unique position that we have to be able to bring a secure element combined with the NFC radio continues to position us in a unique position, especially with the knowledge and insight we bring to the ecosystem, with in-depth technical knowledge on antenna design that is very helpful in the overall structure of a solution.

It clearly differentiates NXP to drive a much more significant participation in the NFC solutions rollout.

That's really helpful.

Thank you.

And just a follow up.

You guys also noted improved bookings trends as you kind of went through the quarter and relative to what they were.

I was wondering if you can kind of quantify that?

I may have missed it if you gave the book-to-bill or any kind of backlog numbers.

And if you just kind of lay out visibility this quarter relative to last quarter in terms of turns required.

Sanjay, we really don't provide a book-to-bill metrics, because it's really -- one figure doesn't really capture our business because it's so disparate across the different product lines.

And we really have not provided a kind of turns-to-go number or backlog in a quarter.

But we feel confident that the guidance that we laid out is just one step towards an improving environment for our business.

Okay, great.

Thank you.

Thanks a lot.

Our next question comes from the line of Mark Lipacis with Jefferies.

You may proceed.

Thanks for cycling me back in here.

Karli, you mentioned new accruals on the OpEx line.

Is that -- how should we think about OpEx for the rest of the year?

Is that -- do we grow it at some fraction of the top line or is there a chance that the accruals roll out and we get lower OpEx?

Thanks.

OpEx will increase a bit in the coming quarters, but not a lot and mainly it's investments in the areas of Identification.

Accruals is now back to normal rates and that's why we were so specific in Q3, telling that half of the savings are coming back.

So, I would say a bit of an increase since we expect increased sales in the following quarters and we will have a bit of an increase in OpEx, not very much.

So, Mark, that's a good sign when our accruals and bonuses coming up.

It means we've got more sales and we're achieving better performance for our shareholders.

So that's actually encouraging that we have to spend some money on OpEx to be able to fund and support the bonus programs.

Sounds good.

Thank you.

Thanks.

Thanks, Mark.

(Operator Instructions).

Our next question comes from the line of Jeff Harlib from Barclays Capital.

You may proceed.

Hi.

I was wondering if you could just -- with the working capital ratios, just talk about how you see those trending over the next few quarters, if they should normalize and do you see yourselves as cash flow positive in Q1?

I believe we're going to be cash flow positive in Q1.

And inventories will not come down in Q1.

I think we will still run with a big inventory because we are ramping up for higher sales in the later quarters.

I think DSO and DPO will come back to normal.

The DSO was very much because it was late sales, partly due to the Thai flooding, but also the turns business picked up really in the month of December.

Okay.

And just on CapEx, how do you see CapEx for the year, assuming a normal demand environment?

And also, if there are any remaining cash restructuring costs?

If we look back to the guidance we had before, it's about 5% of our sales for the full year.

Okay.

And any remaining cash restructuring?

No.

The Redesign is over now and we might have some restructuring, but not to the same extent as we had in the Redesign program.

Basically, all semiconductor companies have restructuring.

It's an ongoing process associated with aligning their manufacturing facilities.

So, I think we're back more of a normalized basis as opposed to the Redesign programs we had over the last few years.

Okay.

Thank you.

Thanks.

And we have no further questions at this time.

Chris, will you re-poll for any questions?

Sure.

(Operator Instructions).

And we have no questions at this time, sir.

Great.

Thank you, Chris.

I'd like to thank everyone for joining our call today.

I'd like to pass it over to Rick for maybe a few final comments.

Thanks, Jeff.

So, thanks, again, for joining us tonight.

Clearly, 2011 was a tough process in the second half of the year, but we are pleased with the improved results that we were able to deliver in our first full year as a public company and look forward to continued improvements throughout 2012.

So, thanks for your support and interest.

Thank you, everyone.

This will end our call for today.

Ladies and gentlemen, that concludes today's conference.

Thank you so much for your participation.

You may now disconnect.

Have a great day.