GAAP to Non-GAAP Core Adjustments:
(a) Stock-based compensation expense is based on the fair value of all stock options and employee stock purchase plan shares in accordance with SFAS No. 123(R).
(b) Transitional salaries and benefits represent amounts earned by employees who have been notified of their termination as part of our restructuring activities, from the date of their notification.
(c) Amortization of intangible assets resulting from business combinations.
(d) Asset impairments for the three and twelve months ended October 3, 2008 includes non-cash impairment charges related to our Broadband Access (BBA) product lines related to goodwill of $108.6 million, intangible assets of $1.9 million, property, plant and equipment of $6.5 million and technical license tool impairments of $3.4 million. Asset impairments for the twelve months ended September 28, 2007 also includes non-cash impairment charges related to our Embedded Wireless Networking business of $135.0 million and $20.0 million.
(e) Special charges for the three and twelve months ended October 3, 2008, primarily consists of restructuring charges. In addition, a $6.3 million expense incurred on the termination of a defined benefit plan was recorded during the twelve months ended October 3, 2008. Special charges for the three and twelve months ended September 28, 2007 also consist of restructuring charges as well as legal settlements totaling $20.0 million.
(f) Other gains and losses which are not part of our core, on-going operations. For the three and twelve months ended October 3, 2008, includes the impact of environmental remediation charges and a charge from inventory acquired through the purchase of the “SigmaTel” multifunction printer imaging product lines in the fourth quarter of fiscal 2008.
(g) Unrealized gains and losses associated with changes in the fair value of our warrant to purchase 6 million shares of Mindspeed Technologies, Inc. common stock, which is accounted for as a derivative instrument.
(h) Gains on sales of equity securities or on the liquidation of companies in which we held equity securities.
(i) Gain (loss) of equity method investments for the twelve months ended September 28, 2007 includes a gain on the sale of our investment in Jazz Semiconductor, Inc. of $43.5 million.
(j) Represents other income and expenses which are not part of our core, on-going operations. For the three and twelve months ended September 28, 2007, this amount includes investment credits for asset disposals.
(k) Our first quarter fiscal 2008 financial results included $14.7 million of non-recurring revenue that resulted from the buyout of a future royalty stream.
(l) On June 27, 2008, we affected a one-for-ten reverse stock split of our common stock. All share and per share data in these financial statements have been adjusted to give effect to the reverse split.
(m) Other gains and losses which are not part of our on-going operations. For the three and twelve months ended October 3, 2008, the adjustment relates to a purchase accounting expense of in-process research and development acquired through the purchase of the “SigmaTel” multifunction printer imaging product lines.
(n) Other interest expense which is not part of our on-going operations. For the twelve months ended October 3, 2008, the adjustment relates to the accelerated amortization of debt issuance costs related to the repurchase of $53.6 million of floating rate senior notes.
(o) Other gains and losses which are not part of our on-going operations. For the twelve months ended October 3, 2008, the adjustments relate to the gain on the sale of a building in Noida, India and the provision for income taxes incurred on the gain.
(p) Other gains and losses which are not part of our on-going operations. For the three and twelve months ended October 3, 2008, the adjustment relates to the loss incurred on a non-cancelable lease obligation.
Non-GAAP Financial Measures:
We have presented non-GAAP cost of goods sold, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP other income, non-GAAP provision for income taxes, non-GAAP net income (loss) and non-GAAP basic and diluted net income (loss) per share, on a basis consistent with our historical presentation to assist investors in understanding our core results of operations on an on-going basis. These non-GAAP financial measures also enhance comparisons of our core results of operations with historical periods. We are providing these non-GAAP financial measures to investors to enable them to perform additional financial analysis and because it is consistent with the financial models and estimates published by analysts who follow our company. Management believes that these are important measures in the evaluation of our results of operations. Investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by us may be different than non-GAAP financial measures presented by other companies.
GAAP Guidance:
We do not present GAAP guidance due to our inability to project (i) future market prices of the common stock of a third party underlying a derivative financial instrument, (ii) realized gains or losses from the sale of equity securities in third parties, and (iii) the financial results of investments accounted for using the equity method of accounting.
CONEXANT SYSTEMS, INC. Condensed Consolidated Balance Sheets (unaudited, in thousands) |
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October 3, | September 28, | ||||||
2008 | 2007 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 105,883 | $ | 234,147 | |||
Restricted cash | 26,800 | 8,800 | |||||
Receivables | 48,997 | 80,856 | |||||
Inventories | 36,439 | 42,007 | |||||
Other current assets | 38,537 | 18,131 | |||||
Current assets held for sale | — | 250,451 | |||||
Total current assets | 256,656 | 634,392 | |||||
Property, plant and equipment, net | 24,912 | 46,676 | |||||
Goodwill | 110,412 | 214,635 | |||||
Intangible assets, net | 14,971 | 24,597 | |||||
Other assets | 39,452 | 65,669 | |||||
Total assets | $ | 446,403 | $ | 985,969 | |||
LIABILITIES AND SHAREHOLDERS ’ EQUITY | |||||||
Current liabilities: | |||||||
Current portion of long-term debt | $ | 17,707 | $ | 58,000 | |||
Short-term debt | 40,117 | 80,000 | |||||
Accounts payable | 34,894 | 80,571 | |||||
Accrued compensation and benefits | 14,989 | 23,191 | |||||
Other current liabilities | 44,385 | 70,345 | |||||
Current liabilities to be assumed | — | 3,925 | |||||
Total current liabilities | 152,092 | 316,032 | |||||
Long-term debt | 373,693 | 467,000 | |||||
Other liabilities | 57,352 | 56,422 | |||||
Total liabilities | 583,137 | 839,454 | |||||
Shareholders ’ (deficit) equity | (136,734 | ) | 146,515 | ||||
Total liabilities and shareholders ’ (deficit) equity | $ | 446,403 | $ | 985,969 |
CONEXANT SYSTEMS, INC. Selected Other Data (unaudited, in thousands) |
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Three Months Ended | Twelve Months Ended | ||||||||||||||
October 3, | June 27, | September 28, | October 3, | September 28, | |||||||||||
2008 | 2008 | 2007 | 2008 | 2007 | |||||||||||
Revenues By Region: | |||||||||||||||
Americas | $ | 8,391 | $ | 8,995 | $ | 9,159 | $ | 35,258 | $ | 36,951 | |||||
Asia-Pacific | 108,577 | 99,690 | 125,303 | 442,043 | 510,717 | ||||||||||
Europe, Middle East and Africa | 5,647 | 6,909 | 4,471 | 25,359 | 25,908 | ||||||||||
$ | 122,615 | $ | 115,594 | $ | 138,933 | $ | 502,660 | $ | 573,576 | ||||||
Cash Flow Data: | |||||||||||||||
Depreciation of PP&E | $ | 2,846 | $ | 5,245 | $ | 6,650 | $ | 19,311 | $ | 25,091 | |||||
Capital expenditures | $ |
1,718 |
$ | 551 | $ | 7,189 | $ |
5,958 |
$ | 30,322 |