Conexant Reports $213.1 Million in Revenue for the Fourth Fiscal Quarter of 2004

RED BANK, N. J.—(BUSINESS WIRE)—Nov. 4, 2004— Conexant Systems, Inc. (NASDAQ: CNXT), today announced revenues of $213.1 million for the fourth quarter of fiscal 2004, which ended Oct. 1, 2004. The company's fourth fiscal quarter performance was consistent with its revised outlook provided on Sept. 30, 2004.

The merger of Conexant and GlobespanVirata was completed on Feb. 27, 2004. Since then, results have been reported on a combined-company basis. Certain financial comparisons in this press release present combined-company results with pre-merger Conexant-only results.

Fourth fiscal quarter 2004 revenues of $213.1 million decreased 20 percent from the third fiscal quarter revenues of $267.6 million. Fourth fiscal quarter 2004 revenues increased 29 percent over fourth fiscal quarter 2003 revenues of $164.7 million as a result of the merger. The net loss for the fourth quarter of fiscal 2004 was $367.5 million, or $0.79 per diluted share, compared to net income of $37.2 million, or $0.12 per diluted share, in the fourth quarter of fiscal 2003, and a net loss of $71.4 million, or $0.15 per diluted share, in the third quarter of fiscal 2004. Included in the fourth quarter of fiscal 2004 net loss is a $256.0 million non-cash charge for the impairment of deferred tax assets.

Fiscal year 2004 revenues of $901.9 million increased 50 percent over fiscal 2003 revenues of $600.0 million as a result of the merger. The net loss for fiscal 2004 was $541.6 million, or $1.39 per diluted share, compared to a net loss in fiscal 2003 of $705.3 million, or $2.56 per diluted share. The net loss in fiscal 2003 includes a $728.9 million loss from discontinued operations.

Conexant provides pro forma results as a supplement to financial statements based on generally accepted accounting principles (GAAP). Conexant uses pro forma information to evaluate its operating performance and believes this presentation provides investors with additional insight into its underlying operating results. A full reconciliation between the GAAP results from continuing operations and pro forma net income is included in the accompanying financial data.

Fourth fiscal quarter 2004 pro forma operating loss was $9.6 million, or 4.5 percent of revenues, compared to a pro forma operating profit of $6.7 million in the year-ago quarter, and a pro forma operating profit of $8.1 million in the third quarter of fiscal 2004. On a pro forma basis, net loss for the fourth quarter of 2004 was $0.02 per diluted share, compared to a net profit of $0.03 per diluted share in the fourth quarter of 2003.

For fiscal year 2004, pro forma net profit was $40.6 million, or $0.09 per diluted share, compared to fiscal 2003 pro forma net profit of $28.6 million, or $0.10 per diluted share.

"Conexant's sequential decline in revenues to $213.1 million in the fourth fiscal quarter was largely due to excess channel inventory that resulted from lower-than-expected customer demand," said Armando Geday, Conexant's chief executive officer. "As is often the case during an inventory correction, our revenue decline was exacerbated by average selling price erosion caused by an unfavorable product mix as newer, more valuable products were slower to ramp. While our visibility continues to be limited, we remain confident in Conexant's long-term prospects."

Gross margin for the fourth fiscal quarter of 2004 was 40 percent of net revenues. Pro forma operating expenses for the quarter were $95.1 million, an improvement of $9.3 million or 9 percent compared to pro forma operating expenses of $104.4 million for the third fiscal quarter of 2004. The company's cash, cash equivalents and short- and long-term investments totaled $439.7 million at the end of the quarter.

First Fiscal Quarter 2005 Outlook

Beginning in the first quarter of fiscal 2005, Conexant will no longer assume conversion of its convertible debt for purposes of pro forma reporting. As a result, interest expense from the company's convertible debt will be included in other expenses, and shares represented by the convertible debt will be excluded from the fully diluted share count when calculating pro forma earnings per share.

"For the first quarter of fiscal 2005, we expect Conexant revenues to be down sequentially, to a range between $175 million and $185 million as a result of continued excess inventory consumption," Geday said. "We anticipate that we will again generate gross margins of approximately 40 percent of revenues, and we expect pro forma operating expenses to decline to $93 million for the quarter as we complete previously announced expense-reduction initiatives. Finally, we anticipate that our pro forma non-GAAP net loss per share will range from $0.06 to $0.07, based on approximately 475 million fully diluted shares."

Note to Editors, Analysts and Investors

Conexant's conference call will take place on Thursday, Nov. 4, 2004, at 5:00 p.m. Eastern time / 2:00 p.m. Pacific time.

To listen to the conference call via telephone, dial 866-710-0179 (domestic) or 334-323-9854 (international); security code: Conexant. To listen via the Internet, visit the Investor Relations section of Conexant's Web site at www.conexant.com/ir.

Playback of the conference call will be available shortly after the call concludes and will be accessible on Conexant's Web site at www.conexant.com/ir or by calling 877-919-4059 (domestic) or 334-323-7226 (international); pass code: 40301677.

About Conexant

Conexant's innovative semiconductor solutions are driving broadband communications, enterprise networks and digital home networks worldwide. The company has leveraged its expertise and leadership position in modem technologies to enable more Internet connections than all of its competitors combined, and continues to develop highly integrated silicon solutions for broadband data and media processing networks.

Key products include client-side xDSL and cable modem solutions, home network processors, broadcast video encoders and decoders, digital set-top box components and systems solutions, and dial-up modems. Conexant's suite of networking components includes a leadership portfolio of IEEE 802.11a/b/g-compliant WLAN chipsets, software and reference designs, as well as solutions for applications based on HomePlug(SM) and HomePNA(TM). The company also offers a complete line of asymmetric and symmetric DSL central office solutions, which are used by service providers worldwide to deliver broadband data, voice, and video over copper telephone lines.

Conexant is a fabless semiconductor company that recorded more than $900 million in revenues in fiscal year 2004. The company has approximately 2,400 employees worldwide, and is headquartered in Red Bank, N.J. To learn more, please visit us at www.conexant.com.

Safe Harbor Statement

This press release contains statements relating to our future results (including certain projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to: the cyclical nature of the semiconductor industry and the markets addressed by the company's and its customers' products; demand for and market acceptance of new and existing products; successful development of new products; the timing of new product introductions; the availability of manufacturing capacity; pricing pressures and other competitive factors; changes in product mix; product obsolescence; the ability to develop and implement new technologies and to obtain protection for the related intellectual property; the uncertainties of litigation; and the risk that the businesses of Conexant and GlobespanVirata will not be integrated successfully, as well as other risks and uncertainties, including those detailed from time to time in our Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Conexant is a registered trademark of Conexant Systems, Inc. Other brands and names contained in this release are the property of their respective owners.
                        CONEXANT SYSTEMS, INC.
                 Consolidated Statements of Operations
          (unaudited, in thousands, except per share amounts)

                               Three months ended      Year ended
                              Sept. 30, Sept. 30, Sept. 30, Sept. 30,
                                 2004      2003      2004            2003

Net  revenues                                      $213,123    $164,703    $901,854    $599,977
Cost  of  goods  sold                            127,681        92,592      523,129      338,161
Gross  margin                                          85,442        72,111      378,725      261,816

Operating  expenses:
    Research  and  development
      (including  non-cash  stock
      compensation  of  $2,233  and
      $5,364  for  the  three  and
      twelve  months  ended
      September  30,  2004,
      respectively,  and  $33  and
      $477  for  the  three  and
      twelve  months  ended
      September  30,  2003,
      respectively)                                  72,766        41,527      239,971      159,354
    Selling,  general  and
      administrative  (including
      non-cash  stock
      compensation  of  $744
      and  $1,773  for  the
      three  and  twelve
      months  ended  September
      30,  2004,  and  $0  and
      $1,272  for  the  three
      and  twelve  months
      ended  September  30,
      2003,  respectively)                      35,692        23,955      125,474        93,426
    Amortization  of  intangible
      assets                                                  8,205              914        20,769          3,437
    In-process  research  and
      development                                              --                --      160,818                --
    Special  charges  (See  Note  1)      15,388          4,794        29,801        18,379
                    Total  operating
                      expenses                          132,051        71,190      576,833      274,596

Operating  income  (loss)                  (46,609)            921    (198,108)    (12,780)

Gain  on  extinguishment  of  debt              --                --                --      (42,021)
Other  (income)  expense,  net            78,517      (34,977)      99,808          5,808

Income  (loss)  before  income
  taxes                                                  (125,126)      35,898    (297,916)      23,433

Provision  (benefit)  for  income
  taxes                                                    242,365        (1,314)    243,733            (129)

Income  (loss)  from  continuing
        operations                                  (367,491)      37,212    (541,649)      23,562

Discontinued  operations,  net
  of  tax                                                            --                --                --    (728,877)

Net  income  (loss)                          $(367,491)    $37,212  $(541,649)$(705,315)

Income  (loss)  per  share,
  basic:
        Continuing  operations                $(0.79)        $0.14        $(1.39)        $0.09
        Discontinued  operations                    --                --                --          (2.72)
        Net  income  (loss)                        $(0.79)        $0.14        $(1.39)      $(2.63)

Income  (loss)  per  share,
  diluted:
        Continuing  operations                $(0.79)        $0.12        $(1.39)        $0.09
        Discontinued  operations                    --                --                --          (2.65)
        Net  income  (loss)                        $(0.79)        $0.12        $(1.39)      $(2.56)

Number  of  shares  used  in  per
  share  computation  -  basic            467,556      273,241      389,630      268,586

Number  of  shares  used  in  per
  share  computation  -  diluted        467,556      303,488      389,630      275,230

The  consolidated  statements  of  operations  include  the  results  of
operations  of  GlobespanVirata,  Inc.  from  Feb.  27,  2004,  the  date  of
the  company's  merger  with  GlobespanVirata.  No  restatement  has  been
made  to  earlier  periods.

Note  1  -  Special  charges  consist  of  asset  impairments,  restructuring
charges,  integration  costs,  other  special  items  and  gains  and  losses
on  the  disposal  of  certain  operating  assets.

                                                CONEXANT  SYSTEMS,  INC.
            Pro  Forma  (Non-GAAP)  Consolidated  Statements  of  Operations
                    (unaudited,  in  thousands,  except  per  share  amounts)

                                                                Three  months  ended          Year  ended
                                                              Sept.  30,  Sept.  30,  Sept.  30,  Sept.  30,
                                                                    2004            2003          2004              2003

Net  revenues                                        $213,123    $164,703  $901,854    $599,977
Cost  of  goods  sold                              127,681        92,592    522,317      338,161
Gross  margin                                            85,442        72,111    379,537      261,816

Operating  expenses:
    Research  and  development                64,495        41,467    227,827      158,799
    Selling,  general  and
      administrative                                  30,574        23,942    115,874        92,117
                    Total  operating
                      expenses                              95,069        65,409    343,701      250,916

Pro  forma  operating  income
  (loss)                                                      (9,627)        6,702      35,836        10,900

Other  income,  net                                      (944)      (2,684)    (6,854)    (17,527)

Pro  forma  income  (loss)  before
  income  taxes                                          (8,683)        9,386      42,690        28,427

Provision  (benefit)  for  income
  taxes                                                              698        (1,314)      2,066            (129)

Pro  forma  net  income  (loss)            $(9,381)    $10,700    $40,624      $28,556

Basic  income  (loss)  per  share
  pro  forma  (non-GAAP)                          $(0.02)        $0.04        $0.10          $0.10

Diluted  income  (loss)  per  share
  pro  forma  (non-GAAP)                          $(0.02)        $0.03        $0.09          $0.10

Number  of  shares  used  in  per
  share  computation  -  basic  -
  pro  forma  (non-GAAP)                        492,897      292,742    412,612      286,007

Number  of  shares  used  in  per
  share  computation  -  diluted  -
  pro  forma  (non-GAAP)                        494,676      315,625    430,880      292,651

The  pro  forma  (non-GAAP)  consolidated  statements  of  operations  include
the  results  of  operations  of  GlobespanVirata,  Inc.  from  Feb.  27,  2004,
the  date  of  the  company's  merger  with  GlobespanVirata.  No  restatement
has  been  made  to  earlier  periods.

Pro  forma  operating  income  (loss),  pro  forma  net  income  (loss),  and
basic  and  fully  diluted  income  (loss)  per  share  pro  forma  (non-GAAP)
excludes  certain  non-cash  and  special  items  related  to  operations,
certain  non-operating  gains  and  losses  and  interest  expense  on  the
convertible  subordinated  notes.  The  company  believes  these  measures  of
income  provide  a  better  understanding  of  its  underlying  operating
results  and  the  company  uses  these  measures  internally  to  evaluate  its
underlying  operating  performance.  These  measures  of  income  are  not  in
accordance  with,  or  an  alternative  for,  generally  accepted  accounting
principles  and  may  be  different  from  pro  forma  measures  used  by  other
companies.

Basic  weighted-average  shares  of  common  stock  outstanding  assume
conversion  of  $711.8  million  of  convertible  subordinated  notes  at
their  applicable  conversion  prices.  Diluted  weighted-average  shares  of
common  stock  outstanding  also  includes  the  effect  of  outstanding
options  and  warrants  using  the  treasury  stock  method.

A  reconciliation  of  consolidated  statements  of  operations,  shares  and
per  share  information  as  determined  under  generally  accepted
accounting  principles  with  the  pro  forma  net  income  (loss),  pro  forma
share  and  per  share  information  presented  above  is  presented  in  the
following  table.


                                                CONEXANT  SYSTEMS,  INC.
            Reconciliation  of  Consolidated  Statements  of  Operations  to
            Pro  Forma  (Non-GAAP)  Consolidated  Statements  of  Operations
                    (unaudited,  in  thousands,  except  per  share  amounts)

                                                              Three  months  ended            Year  ended
                                                            Sept.  30,  Sept.  30,  Sept.  30,  Sept.  30,
                                                                2004            2003            2004            2003

Income  (loss)  from  continuing
  operations  (unaudited)              $(367,491)    $37,212  $(541,649)    $23,562

Non-cash  and  special  items:
      Amortization  of  intangible
        assets                                                8,205              914        20,769          3,437
      In-process  research  and
        development                                            --                --      160,818                --
      IP  litigation  support  costs        2,680                --          5,274                --
      Special  charges  (See  Note  2)    15,388          4,794        29,801        18,379
      Stock  compensation                          2,977                33          7,137          1,749
      Transitional  salaries  and
        benefits    (See  Note  3)                7,732                --          9,020                --
      Gain  on  debt  extinguishment              --                --                --      (42,021)
      Interest  expense  on
        convertible  subordinated
        notes                                                  8,180          6,473        29,877        27,862
      Payroll  taxes  associated
        with  stock  options
        exercised  by  employees                      --                40              313              115
      Equity  in  losses  (earnings)
        of  equity  method  investees      (1,672)          (114)    (14,422)        3,119
      Unrealized  loss  (gain)  on
        note  receivable  from
        Skyworks                                                  --      (11,234)        6,292        (9,402)
      Unrealized  loss  (gain)  on
        Mindspeed  warrant                        54,284      (30,230)      92,663      (30,230)
      Inventory  impairment                            --                --              812                --
      Environmental  charge                          376          1,202              376          1,202
      Federal  income  tax  refund        (14,749)              --      (14,749)              --
      Impairment  of  deferred  tax
        assets                                            255,738                --      255,738                --
      Loss  (gain)  on  sales  of
        investments  and  assets                6,148        (3,390)    (20,869)      (8,618)
      Write-down  of  investments          12,823          5,000        13,423        39,402
Pro  forma  net  income  (loss)          $(9,381)    $10,700      $40,624      $28,556

Income  (loss)  per  share,
  basic:
    Income  (loss)  from
      continuing  operations  (GAAP)    $(0.79)        $0.14        $(1.39)        $0.09
    Non-cash  and  special  items              0.77          (0.10)          1.49            0.01
    Pro  forma  (non-GAAP)  income
      (loss)                                                $(0.02)        $0.04          $0.10          $0.10

Income  (loss)  per  share,
  diluted:
    Income  (loss)  from
      continuing  operations  (GAAP)    $(0.79)        $0.12        $(1.39)        $0.09
    Non-cash  and  special  items              0.77          (0.09)          1.48            0.01
    Pro  forma  (non-GAAP)  income
      (loss)                                                $(0.02)        $0.03          $0.09          $0.10

Number  of  shares  used  in  per
  share  computation  -  basic
  (GAAP)                                                  467,556      273,241      389,630      268,586
Assumed  conversion  of
  convertible  subordinated
  notes                                                      25,341        19,501        22,982        17,421
Number  of  shares  used  in  per
  share  computation  -  basic  -
  pro  forma  (non-GAAP)                      492,897      292,742      412,612      286,007
Effect  of  stock  options  and
  warrants                                                  1,779        22,883        18,268          6,644
Number  of  shares  used  in  per
  share  computation  -  diluted  -
  pro  forma  (non-GAAP)                      494,676      315,625      430,880      292,651

Note  2  -  Special  charges  consist  of  asset  impairments,  restructuring
charges,  integration  costs,  other  special  items  and  gains  and  losses
on  the  disposal  of  certain  operating  assets.

Note  3  -  Transitional  salaries  and  benefits  of  $7,732  and  $9,020  for
the  three  months  and  year  ended  Sept.  30,  2004,  represent  amounts
earned  by  employees,  from  the  beginning  of  each  period  presented,  who
have  been  notified  of  their  termination  as  part  of  our  restructuring
activities.  Included  in  the  above  amounts  are  $295  of  facilities
related  costs.

                                                CONEXANT  SYSTEMS,  INC.
                                  Consolidated  Condensed  Balance  Sheets
                                              (unaudited,  in  thousands)

                                                                                    September  30,  September  30,
                                                                                            2004                    2003
                                                                ASSETS
Current  assets:
    Cash  and  cash  equivalents  (See  Note  4)              $139,031              $76,186
    Marketable  securities  (See  Note  4)                        163,040                99,283
    Receivables,  net                                                            185,037                79,557
    Inventories                                                                      194,754                59,548
    Deferred  income  taxes                                                            --                13,600
    Mindspeed  warrant  -  current  portion                          3,599                        --
    Other  current  assets                                                      20,768                26,524
                    Total  current  assets                                    706,229              354,698

Property,  plant  and  equipment,  net                              55,741                36,310
Goodwill                                                                                708,544                56,865
Intangible  assets,  net                                                    135,241                12,506
Deferred  income  taxes                                                                --              241,260
Mindspeed  warrant                                                                23,000              119,230
Marketable  securities  -  long-term  (See
  Note  4)                                                                                137,604                        --
Other  assets                                                                        114,163              110,838
                    Total  assets                                              $1,880,522            $931,707

                                  LIABILITIES  AND  SHAREHOLDERS'  EQUITY
Current  liabilities:
    Accounts  payable                                                          $143,187              $55,909
    Accrued  compensation  and  benefits                            40,423                28,865
    Restructuring  and  reorganization
      liabilities                                                                      22,427                12,091
    Other  current  liabilities                                            62,390                24,816
                    Total  current  liabilities                          268,427              121,681

Convertible  subordinated  notes                                    711,825              581,825
Other  liabilities                                                                68,883                61,435
                    Total  liabilities                                      1,049,135              764,941

Shareholders'  equity                                                        831,387              166,766
                    Total  liabilities  and
                      shareholders'  equity                            $1,880,522            $931,707

The  consolidated  condensed  balance  sheet  at  Sept.  30,  2004,  includes
the  assets  and  liabilities  at  fair  value  of  GlobespanVirata,  Inc.  and
allocation  of  purchase  price  to  intangibles  and  goodwill  as  of  Feb.
27,  2004,  the  date  of  the  company's  merger  with  GlobespanVirata,
adjusted  for  subsequent  changes.

Note  4  -  Total  cash,  cash  equivalents  and  marketable  securities  at
Sept.  30,  2004,  and  at  Sept.  30,  2003,  are  as  follows:


                                                                                                      Sept.  30,  Sept.  30,
                                                                                                          2004            2003

Cash  and  cash  equivalents                                                    $139,031      $76,186
Skyworks  15%  convertible  senior  subordinated  notes              --        55,566
Equity  securities  -  Skyworks  Solutions,  Inc.    (6.2
  million  shares  at  September  30,  2004,  0.5  million
  shares  at  September  30,  2003)                                              61,767          4,576
Equity  securities  -  SiRF  Technologies,  Inc.    (5.9
  million  shares  at  September  30,  2004)                              87,509                --
Other  short-term  marketable  securities  (primarily
  mutual  funds,  domestic  government  agencies  and
  corporate  debt  securities)                                                    13,764        39,141
Long-term  marketable  securities  (primarily  domestic
  government  agencies  and  corporate  debt  securities)  137,604                --
                                                                                                      $439,675    $175,469


                                                CONEXANT  SYSTEMS,  INC.
                                                    Selected  Other  Data
                                              (unaudited,  in  thousands)

                                                              Three  months  ended            Year  ended
                                                              Sept.  30,  Sept.  30,  Sept.  30,  Sept.  30,
                                                                    2004            2003            2004            2003
Selected  Data  --  From  Continuing
  Operations  (See  Note  5):
Depreciation  (See  Note  6)                $4,814        $3,252      $16,151      $16,828
Capital  expenditures                            3,641          6,289        17,563        19,844

Revenues  By  Region:
    Americas                                            $23,822      $18,145    $101,264      $68,738
    Asia-Pacific                                    167,236      128,474      721,693      481,055
    Europe,  Middle  East  and
      Africa                                                22,065        18,084        78,897        50,184
                                                              $213,123    $164,703    $901,854    $599,977

Note  5  -  Continuing  operations  excludes  the  discontinued  Mindspeed
Technologies  Internet  infrastructure  business  which  was  spun-off  in
June  2003.

Note  6  -  Does  not  include  amortization  of  intangible  assets,  as
applicable.
 


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