Item 1. Financial Statements

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Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

($ in millions, unless otherwise stated)


	For the three months ended		For the nine months ended
	October 3, 2021	September 27, 2020	October 3, 2021	September 27, 2020
Revenue	2,861	2,267	8,024	6,105
Cost of revenue	(1,278)	(1,177)	(3,664)	(3,158)
Gross profit	1,583	1,090	4,360	2,947
Research and development	(492)	(438)	(1,429)	(1,265)
Selling, general and administrative	(243)	(203)	(699)	(658)
Amortization of acquisition-related intangible assets	(137)	(418)	(456)	(1,179)
Total operating expenses	(872)	(1,059)	(2,584)	(3,102)
Other income (expense)	—	1	—	110
Operating income (loss)	711	32	1,776	(45)
Financial income (expense):

Other financial income (expense)	(93)	(106)	(280)	(280)
Income (loss) before income taxes	618	(74)	1,496	(325)
Benefit (provision) for income taxes	(95)	57	(200)	88
Results relating to equity-accounted investees	3	(1)	—	(3)
Net income (loss)	526	(18)	1,296	(240)
Less: Net income (loss) attributable to non-controlling interests	7	4	27	17
Net income (loss) attributable to stockholders	519	(22)	1,269	(257)

Earnings per share data:
Net income (loss) per common share attributable to stockholders in $
Basic	1.95	(0.08)	4.66	(0.92)
Diluted	1.91	(0.08)	4.57	(0.92)

Weighted average number of shares of common stock outstanding during the period (in thousands):
Basic	266,557	279,467	272,314	279,511
Diluted	271,359	279,467	277,886	279,511

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

($ in millions, unless otherwise stated)


	For the three months ended		For the nine months ended
	October 3, 2021	September 27, 2020	October 3, 2021	September 27, 2020
Net income (loss)	526	(18)	1,296	(240)
Other comprehensive income (loss), net of tax:
Change in fair value cash flow hedges	(2)	4	(16)	5
Change in foreign currency translation adjustment	(23)	37	(56)	14
Change in net actuarial gain (loss)	—	(1)	—	(4)

Total other comprehensive income (loss)	(25)	40	(72)	15
Total comprehensive income (loss)	501	22	1,224	(225)
Less: Comprehensive income (loss) attributable to non-controlling interests	7	4	27	17
Total comprehensive income (loss) attributable to stockholders	494	18	1,197	(242)

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

($ in millions, unless otherwise stated)


		October 3, 2021	December 31, 2020
ASSETS
Current assets:
	Cash and cash equivalents	2,303	2,275
	Accounts receivable, net	979	765

	Inventories, net	1,173	1,030
	Other current assets	266	254
Total current assets		4,721	4,324
Non-current assets:
	Other non-current assets	1,070	1,013
	Property, plant and equipment, net of accumulated depreciation of $4,565 and $4,237	2,510	2,284
	Identified intangible assets, net of accumulated amortization of $7,441 and $7,007	1,741	2,242
	Goodwill	9,968	9,984
	Total non-current assets	15,289	15,523
Total assets		20,010	19,847

LIABILITIES AND EQUITY
Current liabilities:
	Accounts payable	1,140	991

	Restructuring liabilities-current	30	60
	Other current liabilities	1,269	966
	Short-term debt	999	—
Total current liabilities		3,438	2,017
Non-current liabilities:
	Long-term debt	8,594	7,609
	Restructuring liabilities	13	14
	Deferred tax liabilities	84	85
	Other non-current liabilities	909	971
Total non-current liabilities		9,600	8,679
Total liabilities		13,038	10,696
Equity:
	Non-controlling interests	234	207

	Stockholders’ equity:
	Common stock, par value €0.20 per share:	59	59
	Capital in excess of par value	14,392	14,133
	Treasury shares, at cost:
	23,179,725 shares (2020: 9,044,952 shares)	(4,028)	(1,037)
	Accumulated other comprehensive income (loss)	45	117
	Accumulated deficit	(3,730)	(4,328)
	Total stockholders’ equity	6,738	8,944
Total equity		6,972	9,151
Total liabilities and equity		20,010	19,847

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

($ in millions, unless otherwise stated)


	For the nine months ended
	October 3, 2021	September 27, 2020
Cash flows from operating activities:
Net income (loss)	1,296	(240)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization	952	1,672
Share-based compensation	265	295
Amortization of discount (premium) on debt, net	1	(1)
Amortization of debt issuance costs	5	7
Net (gain) loss on sale of assets	—	(111)
(Gain) loss on equity security, net	(2)	—

Results relating to equity-accounted investees	—	3
Deferred tax expense (benefit)	6	(274)
Changes in operating assets and liabilities:
(Increase) decrease in receivables and other current assets	(214)	(1)
(Increase) decrease in inventories	(143)	129
Increase (decrease) in accounts payable and other liabilities	242	(14)
Decrease (increase) in other non-current assets	(106)	(16)
Exchange differences	(3)	6
Other items	(7)	(2)
Net cash provided by (used for) operating activities	2,292	1,453
Cash flows from investing activities:
Purchase of identified intangible assets	(99)	(95)
Capital expenditures on property, plant and equipment	(501)	(288)
Purchase of equipment leased to others	(14)	—
Insurance recoveries received for equipment damage	7	—
Proceeds from disposals of property, plant and equipment	1	3
Purchase of interests in businesses, net of cash acquired	(17)	(21)
Proceeds from sale of interests in businesses, net of cash divested	—	161
Purchase of investments	(6)	(15)
Proceeds from sale of investments	8	—
Proceeds from return of equity investment	3	—
Net cash provided by (used for) investing activities	(618)	(255)
Cash flows from financing activities:


Proceeds from the issuance of long-term debt	2,000	2,000
Cash paid for debt issuance costs	(22)	(15)

Dividends paid to non-controlling interests	—	(34)
Dividends paid to common stockholders	(412)	(315)
Proceeds from issuance of common stock through stock plans	60	64
Purchase of treasury shares and restricted stock unit withholdings	(3,265)	(370)
Other, net	(1)	—
Net cash provided by (used for) financing activities	(1,640)	1,330
Effect of changes in exchange rates on cash positions	(6)	(7)
Increase (decrease) in cash and cash equivalents	28	2,521
Cash and cash equivalents at beginning of period	2,275	1,045
Cash and cash equivalents at end of period	2,303	3,566

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:
Interest	216	211
Income taxes, net of refunds	250	103
Net gain (loss) on sale of assets:
Cash proceeds from the sale of assets	—	163
Book value of these assets	—	(52)
Non-cash investing activities:
Non-cash capital expenditures	224	62

See accompanying notes to the Condensed Consolidated Financial Statements

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, 2020	280,475	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 plans			91				91		91
Shares issued pursuant to stock awards	361			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, 2021	275,749	59	14,224	(1,905)	61	(4,136)	8,303	218	8,521
Net income (loss)						397	397	9	406
Other comprehensive income					9		9		9
Share-based compensation plans			88				88		88
Shares issued pursuant to stock awards	64			6		(6)	—		—
Treasury shares and restricted stock unit withholdings	(6,103)			(1,203)			(1,203)		(1,203)



Dividends common stock ($0.5625 per share)						(152)	(152)		(152)
Balance as of July 4, 2021	269,710	59	14,312	(3,102)	70	(3,897)	7,442	227	7,669
Net income (loss)						519	519	7	526
Other comprehensive income					(25)		(25)		(25)
Share-based compensation plans			80				80		80
Shares issued pursuant to stock awards	2,430			231		(202)	29		29
Treasury shares and restricted stock unit withholdings	(5,800)			(1,157)			(1,157)		(1,157)

Dividends common stock ($0.5625 per share)						(150)	(150)		(150)
Balance as of October 3, 2021	266,340	59	14,392	(4,028)	45	(3,730)	6,738	234	6,972

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, 2019	281,437	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 plans			108				108		108
Shares issued pursuant to stock awards	497			47		(18)	29		29
Treasury shares repurchased and retired	(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, 2020	279,001	64	15,236	(3,345)	14	(2,933)	9,036	222	9,258
Net income (loss)						(214)	(214)	5	(209)
Other comprehensive income					36		36		36
Share-based compensation plans			104				104		104
Shares issued pursuant to stock awards	252			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, 2020	279,213	64	15,228	(3,325)	50	(3,155)	8,862	193	9,055
Net income (loss)						(22)	(22)	4	(18)
Other comprehensive income					40		40		40
Share-based compensation plans			86				86		86
Shares issued pursuant to stock awards	611			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, 2020	279,729	64	15,314	(3,279)	90	(3,313)	8,876	197	9,073

See accompanying notes to the Condensed Consolidated Financial Statements

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, 2020.

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, 2020.

On October 12, 2021, NXP announced that Bill Betz, formerly the Company’s Senior Vice President, Business Finance, had been named as Executive Vice President and Chief Financial Officer. Mr. Betz will succeed Peter Kelly who will provide advice and assistance to the Company's CEO and transition assistance and support to Mr. Betz through his previously announced retirement date.

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, 10-K for the year ended December 31, 2020. The accounting policy information below is to aid in the understanding of the financial information disclosed.

Accounting standards recently adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 modifies ASC 740 to simplify the accounting for income taxes, removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application. ASU 2019-12 became effective for us on January 1, 2021. We have assessed our current positions and the interrelation to the amendments and 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

2021

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

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.

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		For the nine months ended
	October 3, 2021	September 27, 2020	October 3, 2021	September 27, 2020
Distributors	1,631	1,243	4,617	3,286
Original Equipment Manufacturers and Electronic Manufacturing Services	1,191	983	3,295	2,695
Other	39	41	112	124
Total	2,861	2,267	8,024	6,105

Depreciation, amortization and impairment


	For the three months ended		For the nine months ended
	October 3, 2021	September 27, 2020	October 3, 2021	September 27, 2020
Depreciation of property, plant and equipment	139	139	406	408
Amortization of internal use software	1	1	5	4
Amortization of other identified intangible assets 1)	166	449	541	1,260
Total - Depreciation, amortization and impairment	306	589	952	1,672

For the nine month period ending October 3, 2021, the amount includes an impairment charge as a result of the discontinuation of an IPR&D project for an amount of $36 million. For the three and nine month periods ending September 27, 2020, the amounts include an impairment relative to IPR&D acquired as part of the acquisition of Freescale for an amount of $36 million.

Other income (expense)

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

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


	For the three months ended		For the nine months ended
	October 3, 2021	September 27, 2020	October 3, 2021	September 27, 2020


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

Financial income and expense


	For the three months ended		For the nine months ended
	October 3, 2021	September 27, 2020	October 3, 2021	September 27, 2020
Interest income	1	3	3	11
Interest expense	(96)	(100)	(273)	(276)
Total interest expense, net	(95)	(97)	(270)	(265)

Foreign exchange rate results	3	(5)	3	(6)

Miscellaneous financing costs/income and other, net	(1)	(4)	(13)	(9)
Total other financial income/ (expense)	2	(9)	(10)	(15)
Total - Financial income and expenses	(93)	(106)	(280)	(280)

Earnings per share

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


	For the three months ended		For the nine months ended
	October 3, 2021	September 27, 2020	October 3, 2021	September 27, 2020
Net income (loss)	526	(18)	1,296	(240)
Less: net income (loss) attributable to non-controlling interests	7	4	27	17
Net income (loss) attributable to stockholders	519	(22)	1,269	(257)

Weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)	266,557	279,467	272,314	279,511
Plus incremental shares from assumed conversion of:
Options 1)	378	—	397	—
Restricted Share Units, Performance Share Units and Equity Rights 2)	4,424	—	5,175	—
Dilutive potential common shares	4,802	—	5,572	—

Adjusted weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)	271,359	279,467	277,886	279,511

EPS attributable to stockholders in $:
Basic net income (loss)	1.95	(0.08)	4.66	(0.92)
Diluted net income (loss)	1.91	(0.08)	4.57	(0.92)

There were no stock options to purchase shares of NXP’s common stock that were outstanding in Q3 2021 and YTD 2021 (Q3 2020: 0.9 million shares; YTD 2020: 0.9 million 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 was greater than the weighted average number of shares underlying outstanding stock options.
There were no unvested RSUs, PSUs and equity rights that were outstanding in Q3 2021 and YTD 2021 (Q3 2020: 7.4 million shares; YTD 2020: 7.4 million 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 was 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 October 3, 2021 and December 31, 2020, our cash balance was $2,303 million and $2,275 million, respectively, of which $217 million and $185 million was held by SSMC, our consolidated joint venture company with TSMC. Under the terms of our joint venture agreement with TSMC, a portion of this cash can be distributed by way of a dividend to us, but 38.8% of the dividend will be paid to our joint venture partner. During the first nine months of 2021, no dividend was declared by SSMC. In 2020, $90 million has been declared by SSMC, which was distributed in the third quarter of 2020, with 38.8% being paid to our joint venture partner.

Inventories

The portion of finished goods stored at customer locations under consignment amounted to $13 million as of October 3, 2021 (December 31, 2020: $31 million).

Inventories are summarized as follows:


	October 3, 2021	December 31, 2020
Raw materials	96	66
Work in process	894	786
Finished goods	183	178
	1,173	1,030

The amounts recorded above are net of allowance for obsolescence of $115 million as of October 3, 2021 (December 31, 2020: $122 million).

Equity Investments

At October 3, 2021 and December 31, 2020, the total carrying value of investments in equity securities is summarized as follows:


	October 3, 2021	December 31, 2020
Marketable equity securities	21	19
Non-marketable equity securities	23	40
Equity-accounted investments	74	61
	118	120

The total carrying value of investments in equity-accounted investees is summarized as follows:


	October 3, 2021			December 31, 2020
	Shareholding %		Amount	Shareholding %		Amount
Wise Road Industry Investment Fund I, L.P.	9.66	%	37	10.17	%	29
Others	—		37	—		32
			74			61

Results related to equity-accounted investees at the end of each period were as follows:


	For the three months ended		For the nine months ended
	October 3, 2021	September 27, 2020	October 3, 2021	September 27, 2020
Company’s share in income (loss)	4	(1)	1	(3)
Other results	(1)	—	(1)	—
	3	(1)	—	(3)

Other current liabilities

Other current liabilities at October 3, 2021 and December 31, 2020 consisted of the following:


	October 3, 2021	December 31, 2020
Accrued compensation and benefits	516	286
Income taxes payable	82	140
Dividend payable	150	105
Other	521	435
	1,269	966

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, 2020	281	11	(175)	117
Other comprehensive income (loss) before reclassifications	(56)	(13)	—	(69)
Amounts reclassified out of accumulated other comprehensive income (loss)	—	(9)	—	(9)
Tax effects	—	6	—	6
Other comprehensive income (loss)	(56)	(16)	—	(72)
As of October 3, 2021	225	(5)	(175)	45

Cash dividends

The following dividends were declared during the first three quarters of 2021 and 2020 under NXP’s quarterly dividend program:


	Fiscal year 2021		Fiscal year 2020
	Dividend per share	Amount	Dividend per share	Amount
First quarter	0.5625	155	0.375	105
Second quarter	0.5625	152	0.375	105
Third quarter	0.5625	150	0.375	105

	1.6875	457	1.125	315

The dividend declared in the third quarter (not yet paid) is classified in the condensed consolidated balance sheet in other current liabilities as of October 3, 2021 and was subsequently paid on October 6, 2021.

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 2021:


			As of January 1, 2021						Additions						Utilized						Released						Other changes						As of October 3, 2021
Restructuring liabilities			74						1						(32)						—						—						43

The restructuring charges consist of personnel lay-off costs of $1 million restructuring costs incurred for the nine month period ended October 3, 2021 (September 27, 2020: $40 million).

These restructuring charges recorded in operating income, for the periods indicated, are included in the following line items in the statement of operations:


	For the three months ended		For the nine months ended
	October 3, 2021	September 27, 2020	October 3, 2021	September 27, 2020
Cost of revenue	—	12	—	15
Research and development	—	7	1	17
Selling, general and administrative	—	2	—	8

Net restructuring charges	—	21	1	40

6 Income Taxes

Benefit/provision for income taxes:


	For the three months ended				For the nine months ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Tax expense (benefit)	95		(57)		200		(88)
Effective tax rate	15.4	%	77.0	%	13.4	%	27.1	%

Our provision for income taxes for the first nine months of 2021 was $200 million (13.4% effective tax rate) compared to a benefit from income taxes of ($88 million) (27.1% effective tax rate) for the first nine months of 2020. The increase in the income tax expense was due to higher income before income taxes, offset by the net change in the valuation allowance between the two periods and an increase in tax incentives (both as a result of the improved operational performance of the company).

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 third quarter of 2021 by $3 million and decreased by $2 million for the third quarter 2020 (YTD 2021: a decrease of $10 million and YTD 2020: a decrease of $7 million). The benefit of this tax holiday on net income per share (diluted) was $0.01 for the third quarter of 2021 (YTD 2021: $0.04) and $0.01 for the third quarter of 2020 (YTD 2020: $0.03).

7 Identified Intangible Assets

Identified intangible assets as of October 3, 2021 and December 31, 2020, respectively, were composed of the following:


	October 3, 2021		December 31, 2020
	Gross carrying amount	Accumulated amortization	Gross carrying amount	Accumulated amortization
In-process R&D (IPR&D) 1)	111	—	147	—
Marketing-related	81	(81)	81	(81)
Customer-related	910	(371)	957	(381)
Technology-based	8,080	(6,989)	8,064	(6,545)
Identified intangible assets	9,182	(7,441)	9,249	(7,007)

(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:


2021 (remaining)			166
2022			579
2023			343
2024			156
2025			102
Thereafter			395

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 October 3, 2021 (December 31, 2020: 4 years).

8 Debt

The following table summarizes the outstanding debt as of October 3, 2021 and December 31, 2020:


		October 3, 2021		December 31, 2020
	Maturities	Amount	Effective rate	Amount	Effective rate
Fixed-rate 3.875% senior unsecured notes	Sep, 2022	1,000	3.875	1,000	3.875
Fixed-rate 4.625% senior unsecured notes	Jun, 2023	900	4.625	900	4.625
Fixed-rate 4.875% senior unsecured notes	Mar, 2024	1,000	4.875	1,000	4.875
Fixed-rate 2.7% senior unsecured notes	May, 2025	500	2.700	500	2.700
Fixed-rate 5.35% senior unsecured notes	Mar, 2026	500	5.350	500	5.350
Fixed-rate 3.875% senior unsecured notes	Jun, 2026	750	3.875	750	3.875
Fixed-rate 3.15% senior unsecured notes	May, 2027	500	3.150	500	3.150
Fixed-rate 5.55% senior unsecured notes	Dec, 2028	500	5.550	500	5.550
Fixed-rate 4.3% senior unsecured notes	Jun, 2029	1,000	4.300	1,000	4.300
Fixed-rate 3.4% senior unsecured notes	May, 2030	1,000	3.400	1,000	3.400
Fixed-rate 2.5% senior unsecured notes	May, 2031	1,000	2.500	—	—
Fixed-rate 3.25% senior unsecured notes	May, 2041	1,000	3.250	—	—
Floating-rate revolving credit facility (RCF)	Jun, 2024	—	—	—	—
Total principal		9,650		7,650

Unamortized discounts, premiums and debt issuance costs		(57)		(41)
Total debt, including unamortized discounts, premiums, debt issuance costs and fair value adjustments		9,593		7,609
Current portion of long-term debt		999		—
Long-term debt		8,594		7,609

9 Related-Party Transactions

The Company's related parties are the members of the board of directors of NXP Semiconductors N.V., the members of the management team 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		For the nine months ended
	October 3, 2021	September 27, 2020	October 3, 2021	September 27, 2020
Revenue and other income	2	16	6	52
Purchase of goods and services	1	9	3	35

The following table presents the amounts related to receivable and payable balances with these related parties:


	October 3, 2021	December 31, 2020
Receivables	2	3
Payables	3	7

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	October 3, 2021	December 31, 2020
Assets:
Money market funds	1	1,520	1,469
Marketable equity securities	1	21	19
Derivative instruments-assets	2	1	18

Liabilities:



Derivative instruments-liabilities	2	(13)	—

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 October 3, 2021, the estimated fair value of debt, including the current portion, was $10.4 billion ($8.6 billion as of December 31, 2020). 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 October 3, 2021, the Company had purchase commitments of $4,364 million, which are due through 2044. Our long-term obligations increased substantially year to date 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 $20 million accrued for potential and current legal proceedings pending as of October 3, 2021, compared to $17 million accrued at December 31, 2020. The accruals are included in “Other current liabilities” and “Other non-current liabilities”. As of October 3, 2021, the Company’s related balance of insurance reimbursements was $8 million (December 31, 2020: $8 million) and is included in “Other current assets” and “Other non-current assets”.

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 (including the fact that many of them are currently in preliminary stages), 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 October 3, 2021, 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 $20 million. Based upon our past experience with these matters, the Company would expect to receive insurance reimbursement on certain of these claims that would offset the potential maximum exposure of up to $15 million.

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 Cook County, Illinois. These claims allege a link between working in semiconductor manufacturing clean room facilities and birth defects in 18 individuals. The Motorola suits allege exposures between 1981 and 2005. 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. In the Motorola suits, 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.

Loss recovery

In February 2021, NXP’s two wafer manufacturing facilities in Austin, Texas were negatively impacted by unusually severe winter weather conditions that corresponded with a widespread disruption of gas, electricity, and water. The Company has insurance coverage for the repair or replacement of assets that suffered damage or loss and business interruption coverage, including lost profits, and the reimbursement of other expenses and costs that have been incurred relating to the damages and losses suffered.

For the three months ended October 3, 2021, the Company recognized $59 million in insurance proceeds directly offsetting the loss from operations that were incurred in the period. The Company continues to work closely with its insurance carriers and claims adjusters to ascertain the full amount of insurance recoveries due as a result of the damage and loss.

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