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 six months ended
	July 3, 2022	July 4, 2021	July 3, 2022	July 4, 2021
Revenue	3,312	2,596	6,448	5,163
Cost of revenue	(1,430)	(1,174)	(2,789)	(2,386)
Gross profit	1,882	1,422	3,659	2,777
Research and development	(542)	(476)	(1,060)	(937)
Selling, general and administrative	(265)	(234)	(516)	(456)
Amortization of acquisition-related intangible assets	(134)	(139)	(269)	(319)
Total operating expenses	(941)	(849)	(1,845)	(1,712)
Other income (expense)	2	—	2	—
Operating income (loss)	943	573	1,816	1,065
Financial income (expense):
Extinguishment of debt	(18)	—	(18)	—
Other financial income (expense)	(110)	(100)	(215)	(187)
Income (loss) before income taxes	815	473	1,583	878
Benefit (provision) for income taxes	(129)	(65)	(243)	(105)
Results relating to equity-accounted investees	(3)	(2)	9	(3)
Net income (loss)	683	406	1,349	770
Less: Net income (loss) attributable to non-controlling interests	13	9	22	20
Net income (loss) attributable to stockholders	670	397	1,327	750

Earnings per share data:
Net income (loss) per common share attributable to stockholders in $
Basic	2.55	1.46	5.05	2.73
Diluted	2.53	1.42	5.01	2.67

Weighted average number of shares of common stock outstanding during the period (in thousands):
Basic	262,579	272,686	262,837	275,145
Diluted	264,692	278,735	264,909	281,063

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 six months ended
	July 3, 2022	July 4, 2021	July 3, 2022	July 4, 2021
Net income (loss)	683	406	1,349	770
Other comprehensive income (loss), net of tax:
Change in fair value cash flow hedges	(8)	—	(12)	(14)
Change in foreign currency translation adjustment	(69)	9	(87)	(33)
Change in net actuarial gain (loss)	(1)	—	(1)	—

Total other comprehensive income (loss)	(78)	9	(100)	(47)
Total comprehensive income (loss)	605	415	1,249	723
Less: Comprehensive income (loss) attributable to non-controlling interests	13	9	22	20
Total comprehensive income (loss) attributable to stockholders	592	406	1,227	703

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

($ in millions, unless otherwise stated)


		July 3, 2022	December 31, 2021
ASSETS
Current assets:
	Cash and cash equivalents	3,545	2,830
	Accounts receivable, net	996	923

	Inventories, net	1,462	1,189
	Other current assets	317	286
Total current assets		6,320	5,228
Non-current assets:
	Other non-current assets	1,848	1,346
	Property, plant and equipment, net of accumulated depreciation of $4,931 and $4,676	2,914	2,635
	Identified intangible assets, net of accumulated amortization of $3,111 and $3,021	1,527	1,694
	Goodwill	9,930	9,961
	Total non-current assets	16,219	15,636
Total assets		22,539	20,864

LIABILITIES AND EQUITY
Current liabilities:
	Accounts payable	1,462	1,252

	Restructuring liabilities-current	12	25
	Other current liabilities	1,467	1,175

Total current liabilities		2,941	2,452
Non-current liabilities:
	Long-term debt	11,160	10,572
	Restructuring liabilities	12	12
	Deferred tax liabilities	41	57
	Other non-current liabilities	1,159	1,001
Total non-current liabilities		12,372	11,642
Total liabilities		15,313	14,094
Equity:
	Non-controlling interests	264	242

	Stockholders’ equity:
	Common stock, par value €0.20 per share:	56	56
	Capital in excess of par value	13,904	13,727
	Treasury shares, at cost:
	11,924,962 shares (2021: 9,569,359 shares)	(2,424)	(1,932)
	Accumulated other comprehensive income (loss)	(52)	48
	Accumulated deficit	(4,522)	(5,371)
	Total stockholders’ equity	6,962	6,528
Total equity		7,226	6,770
Total liabilities and equity		22,539	20,864

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

($ in millions, unless otherwise stated)


	For the six months ended
	July 3, 2022	July 4, 2021
Cash flows from operating activities:
Net income (loss)	1,349	770
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization	627	646
Share-based compensation	178	184
Amortization of discount (premium) on debt, net	1	1
Amortization of debt issuance costs	3	3
Net (gain) loss on sale of assets	(1)	—
(Gain) loss on equity security, net	4	2
(Gain) loss on extinguishment of debt	18	—
Results relating to equity-accounted investees	(9)	3
Deferred tax expense (benefit)	(98)	12
Changes in operating assets and liabilities:
(Increase) decrease in receivables and other current assets	(111)	(230)
(Increase) decrease in inventories	(273)	(86)
Increase (decrease) in accounts payable and other liabilities	270	124
Decrease (increase) in other non-current assets	(288)	(60)
Exchange differences	(3)	—
Other items	8	(1)
Net cash provided by (used for) operating activities	1,675	1,368
Cash flows from investing activities:
Purchase of identified intangible assets	(72)	(72)
Capital expenditures on property, plant and equipment	(548)	(300)
Purchase of equipment leased to others	(5)	—

Proceeds from disposals of property, plant and equipment	1	—
Purchase of interests in businesses, net of cash acquired	(5)	(1)

Purchase of investments	(2)	(6)
Proceeds from sale of investments	12	8
Proceeds from return of equity investment	2	1
Net cash provided by (used for) investing activities	(617)	(370)
Cash flows from financing activities:
Repurchase of long-term debt	(917)	—

Proceeds from the issuance of long-term debt	1,496	2,000
Cash paid for debt issuance costs	(13)	(22)


Dividends paid to common stockholders	(371)	(260)
Proceeds from issuance of common stock through stock plans	28	31
Purchase of treasury shares and restricted stock unit withholdings	(554)	(2,108)
Other, net	(1)	(1)
Net cash provided by (used for) financing activities	(332)	(360)
Effect of changes in exchange rates on cash positions	(11)	(3)
Increase (decrease) in cash and cash equivalents	715	635
Cash and cash equivalents at beginning of period	2,830	2,275
Cash and cash equivalents at end of period	3,545	2,910


Supplemental disclosures to the condensed consolidated cash flows
Net cash paid during the period for:
Interest	178	160
Income taxes, net of refunds	272	161
Net gain (loss) on sale of assets:
Cash proceeds from the sale of assets	1	—
Book value of these assets	—	—
Non-cash investing activities:
Non-cash capital expenditures	243	167

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, 2021	264,950	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 plans			92				92		92
Shares issued pursuant to stock awards	256			51		(23)	28		28
Treasury shares repurchased and retired	(2,653)			(552)			(552)		(552)
Dividends common stock ($0.8450 per share)						(222)	(222)		(222)
Balance as of April 3, 2022	262,553	56	13,819	(2,433)	26	(4,959)	6,509	251	6,760
Net income (loss)						670	670	13	683
Other comprehensive income					(78)		(78)		(78)
Share-based compensation plans			85				85		85
Shares issued pursuant to stock awards	57			11		(11)	—		—
Treasury shares repurchased and retired	(15)			(2)			(2)		(2)

Dividends common stock ($0.8450 per share)						(222)	(222)		(222)
Balance as of July 3, 2022	262,595	56	13,904	(2,424)	(52)	(4,522)	6,962	264	7,226


	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 repurchased and retired	(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

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, 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 six 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		For the six months ended
	July 3, 2022	July 4, 2021	July 3, 2022	July 4, 2021
Distributors	1,829	1,518	3,509	2,986
Original Equipment Manufacturers and Electronic Manufacturing Services	1,441	1,040	2,853	2,104
Other	42	38	86	73
Total	3,312	2,596	6,448	5,163

Depreciation, amortization and impairment


	For the three months ended		For the six months ended
	July 3, 2022	July 4, 2021	July 3, 2022	July 4, 2021
Depreciation of property, plant and equipment	149	135	291	267
Amortization of internal use software	4	2	6	4
Amortization of other identified intangible assets 1)	164	168	330	375
Total - Depreciation, amortization and impairment	317	305	627	646

For the six month period ending July 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		For the six months ended
	July 3, 2022	July 4, 2021	July 3, 2022	July 4, 2021
Interest income	6	1	8	2
Interest expense	(106)	(90)	(210)	(177)
Total interest expense, net	(100)	(89)	(202)	(175)
Extinguishment of debt	(18)	—	(18)	—
Foreign exchange rate results	3	(1)	3	—
Miscellaneous financing costs/income and other, net	(13)	(10)	(16)	(12)
Total other financial income/ (expense)	(28)	(11)	(31)	(12)
Total - Financial income and expenses	(128)	(100)	(233)	(187)

Earnings per share

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


	For the three months ended		For the six months ended
	July 3, 2022	July 4, 2021	July 3, 2022	July 4, 2021
Net income (loss)	683	406	1,349	770
Less: net income (loss) attributable to non-controlling interests	13	9	22	20
Net income (loss) attributable to stockholders	670	397	1,327	750

Weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)	262,579	272,686	262,837	275,145
Plus incremental shares from assumed conversion of:
Options 1)	295	394	309	406
Restricted Share Units, Performance Share Units and Equity Rights 2)	1,818	5,655	1,763	5,512
Dilutive potential common shares	2,113	6,049	2,072	5,918

Adjusted weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)	264,692	278,735	264,909	281,063

EPS attributable to stockholders in $:
Basic net income (loss)	2.55	1.46	5.05	2.73
Diluted net income (loss)	2.53	1.42	5.01	2.67

There were no stock options to purchase shares of NXP’s common stock that were outstanding in Q2 2022 and YTD 2022 (Q2 2021 and YTD 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.
There were 0.3 million unvested RSUs, PSUs and equity rights that were outstanding in Q2 2022 and 0.3 million outstanding YTD 2022 (Q2 2021 and YTD 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 July 3, 2022 and December 31, 2021, our cash balance was $3,545 million and $2,830 million, respectively, of which $193 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. During both first six months of 2022 and 2021, no dividends were declared by SSMC.

Inventories

The portion of finished goods stored at customer locations under consignment amounted to $8 million as of July 3, 2022 (December 31, 2021: $12 million).

Inventories are summarized as follows:


	July 3, 2022	December 31, 2021
Raw materials	129	107
Work in process	1,083	846
Finished goods	250	236
	1,462	1,189

The amounts recorded above are net of allowance for obsolescence of $136 million as of July 3, 2022 (December 31, 2021: $120 million).

Equity Investments

At July 3, 2022 and December 31, 2021, the total carrying value of investments in equity securities is summarized as follows:


	July 3, 2022	December 31, 2021
Marketable equity securities	10	18
Non-marketable equity securities	10	19
Equity-accounted investments	88	75
	108	112

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


	July 3, 2022			December 31, 2021
	Shareholding %		Amount	Shareholding %		Amount
SMART Growth Fund, L.P.1)	8.41	%	44	8.41	%	31
Others	—		44	—		44
			88			75
1) Previously named “Wise Road Industry Investment Fund I, L.P.”

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


	For the three months ended		For the six months ended
	July 3, 2022	July 4, 2021	July 3, 2022	July 4, 2021
Company's share in income (loss)	(3)	(2)	8	(3)
Other results	—	—	1	—
	(3)	(2)	9	(3)

Other current liabilities

Other current liabilities at July 3, 2022 and December 31, 2021 consisted of the following:


	July 3, 2022	December 31, 2021
Accrued compensation and benefits	463	476
Income taxes payable	134	82
Dividend payable	222	149
Other	648	468
	1,467	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, 2021	207	—	(159)	48
Other comprehensive income (loss) before reclassifications	(87)	(24)	(1)	(112)
Amounts reclassified out of accumulated other comprehensive income (loss)	—	8	—	8
Tax effects	—	4	—	4
Other comprehensive income (loss)	(87)	(12)	(1)	(100)
As of July 3, 2022	120	(12)	(160)	(52)

Cash dividends

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


	Fiscal year 2022		Fiscal year 2021
	Dividend per share	Amount	Dividend per share	Amount
First quarter	0.845	222	0.5625	155
Second quarter	0.845	222	0.5625	152

The dividend declared in the second quarter (not yet paid) is classified in the condensed consolidated balance sheet in other current liabilities as of July 3, 2022 and was subsequently paid on July 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, 2022						Additions						Utilized						Released						Other changes						As of July 3, 2022
Restructuring liabilities			37						1						(8)						(5)						(1)						24

There were no significant restructuring costs incurred for both six month periods ended July 3, 2022 and July 4, 2021 and the utilization of the restructuring liabilities mainly reflects the execution of ongoing restructuring programs the Company initiated in earlier years.

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 six months ended
	July 3, 2022	July 4, 2021	July 3, 2022	July 4, 2021
Cost of revenue	(3)	—	(3)	—
Research and development	(1)	1	(2)	1
Selling, general and administrative	—	—	—	—

Net restructuring charges	(4)	1	(5)	1

6 Income Taxes

Benefit/provision for income taxes:


	For the three months ended				For the six months ended
	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Tax expense (benefit)	129		65		243		105
Effective tax rate	15.8	%	13.7	%	15.4	%	12.0	%

Our provision for income taxes for the first six months of 2022 was $243 million (15.4% effective tax rate) compared to a provision from income taxes of $105 million (12.0% effective tax rate) for the first six 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 six months of 2021 there were income tax benefits due to changes in estimates of prior positions and 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 second quarter of 2022 by $4 million and decreased by $3 million for the second quarter 2021 (YTD 2022: a decrease of $7 million and YTD 2021: a decrease of $7 million). The benefit of this tax holiday on net income per share (diluted) was $0.02 for the second quarter of 2022 (YTD 2022: $0.03) and $0.02 for the second quarter of 2021 (YTD 2021: $0.03).

7 Identified Intangible Assets

Identified intangible assets as of July 3, 2022 and December 31, 2021, respectively, were composed of the following:


	July 3, 2022		December 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-related	849	(345)	852	(325)
Technology-based	3,736	(2,766)	3,686	(2,615)
Identified intangible assets	4,638	(3,111)	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)			308
2023			436
2024			251
2025			133
2026			69
Thereafter			330

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 July 3, 2022 (December 31, 2021: 4 years).

8 Debt

Exchange Offers

On April 14, 2022, we initiated a registered exchange offering of our outstanding Senior Unsecured Notes (the “Notes”) for new issues of substantially identical registered debt securities (the “Exchange Offers”). The Exchange Offers expired on May 16, 2022, at which time substantially all of the Notes were exchanged for registered senior unsecured notes with the U.S. Securities and Exchange Commission.

Debt Issuance and redemption

On May 16, 2022, NXP B.V., together with NXP Funding LLC and NXP USA, Inc., issued $500 million of 4.4% senior unsecured notes due June 1, 2027 and $1 billion of 5.0% senior unsecured notes due January 15, 2033.

On May 27, 2022 we redeemed the $900 million aggregate principal amount of outstanding dollar-denominated 4.625% Senior Unsecured Notes due 2023 in accordance with the terms of the indenture.

The following table summarizes the outstanding debt as of July 3, 2022 and December 31, 2021:


		July 3, 2022		December 31, 2021
	Maturities	Amount	Interest rate	Amount	Interest rate
Fixed-rate 4.625% senior unsecured notes	Jun, 2023	—	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 4.40% senior unsecured notes	June, 2027	500	4.400	—	—
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	1,000	2.500
Fixed-rate 2.65% senior unsecured notes	Feb, 2032	1,000	2.650	1,000	2.650
Fixed-rate 5.00% senior unsecured notes	Jan, 2033	1,000	5.000	—	—
Fixed-rate 3.25% senior unsecured notes	May, 2041	1,000	3.250	1,000	3.250
Fixed-rate 3.125% senior unsecured notes	Feb, 2042	500	3.125	500	3.125
Fixed-rate 3.25% senior unsecured notes	Nov, 2051	500	3.250	500	3.250
Floating-rate revolving credit facility (RCF)	Jun, 2024	—	—	—	—
Total principal		11,250		10,650

Unamortized discounts, premiums and debt issuance costs		(90)		(78)
Total debt, including unamortized discounts, premiums, debt issuance costs and fair value adjustments		11,160		10,572
Current portion of long-term debt		—		—
Long-term debt		11,160		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		For the six months ended
	July 3, 2022	July 4, 2021	July 3, 2022	July 4, 2021
Revenue and other income	2	2	5	4
Purchase of goods and services	1	1	2	2

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


	July 3, 2022	December 31, 2021
Receivables	1	1
Payables	3	3

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	July 3, 2022	December 31, 2021
Assets:
Money market funds	1	2,554	2,111
Marketable equity securities	1	10	18
Derivative instruments-assets	2	1	5

Liabilities:



Derivative instruments-liabilities	2	(26)	(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 July 3, 2022, the estimated fair value of current and non-current debt was $10.2 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 July 3, 2022, the Company had purchase commitments of $3,885 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 July 3, 2022, compared to $65 million accrued at December 31, 2021 (without reduction for any related insurance reimbursements). The accruals are included in “Other non-current liabilities”. As of July 3, 2022, the Company’s related balance of insurance reimbursements was $43 million (December 31, 2021: $46 million) and is included in “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, 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 July 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 $72 million. Based upon our past experience with these matters, the Company would expect to receive additional insurance reimbursement of up to $89 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 22 individuals. The Motorola suits allege exposures between 1980 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. 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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