Conexant Reports Financial Results for the Second Quarter of Fiscal 2009

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) Amortization of intangible assets resulting from business combinations.

(c) Gain on sale of intellectual property which is not part of our core, on-going operations.

(d) Special charges consist primarily of restructuring charges. Special charges in the fiscal quarter ended January 2, 2009 and six months ended April 3, 2009 also include a $3.7 million charge related to a legal settlement.

(e) The fiscal quarter ended January 2, 2009 and six fiscal months ended April 3, 2009 include the impact of environmental remediation charges and a charge from inventory acquired through the purchase of the “SigmaTel” multifunction printer imaging product lines. The fiscal quarter ended April 3, 2009 and fiscal quarter and six fiscal months ended March 28, 2008 include the impact of environmental remediation charges.

(f) Unrealized losses associated with the change 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.

(g) Gains on sales of equity securities and on the liquidation of companies in which we held equity securities.

(h) Losses from other than temporary impairment of marketable securities and cost based investments.

(i) Charge for deferred debt issuance costs as a result of debt repurchase.

(j) Losses (gains) on equity method investments.

(k) The six fiscal months ended March 28, 2008 includes $14.7 million of non-recurring revenue that resulted from the buyout of a future royalty stream.

Non-GAAP Financial Measures:

We have presented non-GAAP net revenues, non-GAAP cost of goods sold, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP other income, non-GAAP net (loss) income from continuing operations and non-GAAP basic and diluted net (loss) income per share from continuing operations, 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)

   

April 3,

2009

October 3,

2008

ASSETS
Current assets:
Cash and cash equivalents $ 110,271 $ 105,883
Restricted cash 17,500 26,800
Receivables, net 37,172 48,997
Inventories, net 18,042 36,439
Other current assets   36,740     38,537  
Total current assets 219,725 256,656
Property, plant and equipment, net 18,448 24,912
Goodwill 111,360 110,412
Intangible assets, net 7,026 14,971
Other assets   36,405     39,452  
Total assets $ 392,964   $ 446,403  
 
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Current portion of long-term debt $ - $ 17,707
Short-term debt 29,721 40,117
Accounts payable 18,365 34,894
Accrued compensation and benefits 11,712 14,989
Other current liabilities   34,461     44,385  
Total current liabilities 94,259 152,092
 
Long-term debt 391,400 373,693
Other liabilities   72,282     57,352  
Total liabilities   557,941     583,137  
Shareholders’ deficit   (164,977 )   (136,734 )
Total liabilities and shareholders’ deficit $ 392,964   $ 446,403  
 

Selected Other Data

(unaudited, in thousands)

 
Fiscal Quarter Ended Six Fiscal Months Ended
April 3,

2009

  January 2,

2009

  March 28,

2008

April 3,

2009

  March 28,

2008

 
Revenues By Region:
Americas $ 5,981 $ 6,475 $ 7,942 $ 12,456 $ 16,696
Asia-Pacific 65,228 76,462 105,183 141,690 235,804
Europe, Middle East and Africa   3,270   3,561   5,393   6,831   11,951
$ 74,479 $ 86,498 $ 118,518 $ 160,977 $ 264,451
 
Cash Flow Data:
Depreciation of PP&E $ 2,010 $ 2,649 $ 4,230 $ 4,659 $ 8,308
Capital expenditures $ 166 $ 181 $ 2,050 $ 347 $ 3,442

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