These adjustments reconcile the Company's GAAP results of operations to the reported non-GAAP results of operations. The Company believes that presentation of net income and net income per share excluding equity-based compensation, amortization of intangible assets, acquired in-process research and development, integration and acquisition expenses in connection with the acquisition of Chipidea provides meaningful supplemental information to investors, as well as management that is indicative of the Company's ongoing operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and budgeting purposes. These non-GAAP measures should not be viewed as a substitute for the Company's GAAP results, and may be different than non-GAAP measures used by other companies.
(a) This adjustment reflects the equity-based compensation expense related
to the Company's adoption of SFAS No. 123 revised (SFAS 123R)
beginning July 1, 2005. For the third fiscal quarter ending March 31,
2008, $1.8 million of equity-based compensation was allocated as
follows: $604,000 to research and development, $577,000 to sales and
marketing and $618,000 to general and administrative. For the second
fiscal quarter ending December 31, 2007, $2.1 million of equity-based
compensation expense was allocated as follows: $825,000 to research
and development, $636,000 to sales and marketing and $621,000 to
general and administrative. For the third quarter of fiscal 2007
ending March 31, 2007, $2.3 million equity-based compensation expense
was allocated as follows: $871,000 to research and development,
$720,000 to sales and marketing and $660,000 to general and
administrative. Management believes that it is useful to investors to
understand how the expenses associated with the adoption of SFAS 123R
are reflected in net income.
(b) This adjustment reflects the expense related to the amortization of
intangibles acquired in connection with the acquisition of Chipidea.
For the third fiscal quarter ending March 31, 2008, $2.4 million of
amortization expense related to these intangible assets was allocated
as follows: $2.3 million to cost of sales, $8,000 to research and
development and $126,000 to sales and marketing. For the second fiscal
quarter ending December 31, 2007, $2.2 million of amortization expense
related to these intangible assets was allocated as follows:
$2.2 million to cost of sales, $9,000 to research and development and
$29,000 to sales and marketing. Management believes that excluding
this charge facilitates comparisons to MIPS' ongoing operating results
because the expense for the amortization of intangibles is not
indicative of operational performance and the amount of such charges
varies significantly based on the size and timing of our acquisitions
and the maturity of the business being acquired.
(c) This adjustment reflects the amortization expense related to the
amount held in escrow and payable to the founders of Chipidea in
connection with the acquisition of Chipidea. This amount is being
recorded in the statement of operations instead of part of the
purchase price of Chipidea since the amount is contingent upon
continued employment of the founders. This adjustment also reflects
legal fees incurred in association with certain financing activities
and the amortization of loan origination fees. For the third fiscal
quarter ending March 31, 2008, $1.7 million was expensed related to
the escrow amount payable to the founders of Chipidea, and $686,000
was expensed related to the amortization of loan origination fees.
For the second fiscal quarter ending December 31, 2007, $1.7 million
was expensed related to the escrow amount payable to the founders of
Chipidea, and $464,000 was expensed related to the amortization of
loan origination fees. Management believes that excluding the
unique charges related to the payment to the founders of Chipidea and
the fees associated with financing activities necessitated by the
acquisition facilitates comparisons to MIPS' ongoing operating results
during periods when there was no amortization of expenses related to
the acquisition of Chipidea or financing activities and also
facilitates investors' understanding of ongoing operating performance.
(d) This adjustment reflects integration expense related to the
acquisition of Chipidea recorded in accounting and legal expense.
Management believes that the integration charges associated with the
acquisition are elements of the acquisition process and that excluding
this charge facilitates comparisons to MIPS' ongoing operating results
during periods when there were no acquisitions and also facilitates
investors' understanding of ongoing operating performance.
(e) This adjustment reflects acquired in-process research and development
expense related to the acquisition of Chipidea. Management believes
that excluding this acquisition related charge facilitates comparisons
to MIPS' ongoing operating results during periods when there were no
acquisitions involving in-process research and development and also
facilitates investors' understanding of ongoing operating performance.
(f) This adjustment reflects restructuring expense related to reduction in
workforce and facilities exit costs. Management believes that
excluding this charge facilitates comparisons to MIPS' ongoing
operating results during periods when there were no restructuring
charges and also facilitates investors' understanding of ongoing
operating performance.
(g) This adjustment reflects the non-GAAP tax adjustment due to the
adjustments described above.
MIPS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME and NET INCOME PER SHARE
(In thousands, except per share data)
(unaudited)
Nine Months Nine Months
Ended Ended
March 31, March 31,
2008 2007
GAAP net income (loss) $(23,373) $6,148
Net income (loss) per basic share $(0.53) $0.14
Net income (loss) per diluted share $(0.53) $0.13
(h) Equity-based compensation expense
under SFAS 123R $6,272 $6,082
(i) Amortization of intangibles 5,640 -
(j) Acquisition related cost 5,837 -
(k) Integration cost 2,239 -
(l) Acquired in-process research and
development 6,350 -
(m) Restructuring 1,279
(n) Tax adjustment (1,390) -
Non-GAAP net income $2,854 $12,230
Non-GAAP net income per basic share $0.07 $0.28
Non-GAAP net income per diluted share $0.06 $0.27
Common shares outstanding - basic 43,887 43,510
Common shares outstanding - diluted 45,680 45,729
