Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - CONEXANT SYSTEMS INC | a55063e8vk.htm |
| EX-23 - EX-23 - CONEXANT SYSTEMS INC | a55063exv23.htm |
| EX-99.3 - EX-99.3 - CONEXANT SYSTEMS INC | a55063exv99w3.htm |
| EX-99.2 - EX-99.2 - CONEXANT SYSTEMS INC | a55063exv99w2.htm |
Exhibit 99.1
Item 6. Selected Financial Data
On August 24, 2009, the Company completed the sale of its Broadband Access (BBA) business
to Ikanos Communications, Inc. (“Ikanos”). Assets sold pursuant to the agreement with Ikanos
include, among other things, specified patents, inventory, contracts and tangible assets. Ikanos
assumed certain liabilities, including obligations under transferred contracts and certain
employee-related liabilities. We also granted to Ikanos a license to use certain of the Company’s
retained technology assets in connection with Ikanos’s current and future products in certain
fields of use, along with a patent license covering certain of the Company’s retained patents to
make, use, and sell such products (or, in some cases, components of such products).
In August 2008, Conexant completed the sale of its Broadband Media Processing (BMP)
business unit. The selected financial data for all periods have been restated to reflect the BMP
and BBA businesses as discontinued operations.
The selected financial data should be read in conjunction with Management’s Discussion
and Analysis of Financial Condition and Results of Operations and the consolidated financial
statements and notes thereto appearing elsewhere in this report.
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| Fiscal Year Ended | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||||
Statement of Operations Data: |
||||||||||||||||||||
Net revenues |
$ | 208,427 | $ | 331,504 | $ | 360,703 | $ | 485,571 | $ | 428,134 | ||||||||||
Cost of goods sold(1)(2) |
86,674 | 137,251 | 161,972 | 223,809 | 260,644 | |||||||||||||||
Gain on cancellation of supply agreement(3) |
— | — | — | (17,500 | ) | — | ||||||||||||||
Gross margin |
121,753 | 194,253 | 198,731 | 279,262 | 167,490 | |||||||||||||||
Operating expenses: |
||||||||||||||||||||
Research and development(2) |
51,351 | 58,439 | 91,885 | 101,274 | 127,990 | |||||||||||||||
Selling, general and administrative(2) |
62,740 | 77,905 | 80,893 | 89,863 | 85,169 | |||||||||||||||
Amortization of intangible assets |
2,976 | 3,652 | 9,555 | 18,450 | 19,769 | |||||||||||||||
Gain on sale of intellectual property(4) |
(12,858 | ) | — | — | — | — | ||||||||||||||
Asset impairments(5) |
5,672 | 277 | 225,380 | 85 | 3,761 | |||||||||||||||
Special charges(6) |
18,983 | 18,682 | 8,360 | 3,731 | 27,501 | |||||||||||||||
Total operating expenses |
128,864 | 158,955 | 416,073 | 213,403 | 264,190 | |||||||||||||||
Operating (loss) income |
(7,111 | ) | 35,298 | (217,342 | ) | 65,859 | (96,700 | ) | ||||||||||||
Interest expense |
34,693 | 40,713 | 48,798 | 39,540 | 28,123 | |||||||||||||||
Other (income) expense, net |
(5,025 | ) | 9,223 | (36,505 | ) | 14,281 | (106,080 | ) | ||||||||||||
(Loss) income from continuing operations before income taxes and (loss) gain on equity method investments |
(36,779 | ) | (14,638 | ) | (229,635 | ) | 12,038 | (18,743 | ) | |||||||||||
Provision for income taxes |
871 | 849 | 798 | 889 | 1,203 | |||||||||||||||
(Loss) income from continuing operations before (loss) gain on equity method investments |
(37,650 | ) | (15,487 | ) | (230,433 | ) | 11,149 | (19,946 | ) | |||||||||||
(Loss) gain on equity method investments |
(2,807 | ) | 2,804 | 51,182 | (8,164 | ) | (10,642 | ) | ||||||||||||
(Loss) income from continuing operations |
(40,457 | ) | (12,683 | ) | (179,251 | ) | 2,985 | (30,588 | ) | |||||||||||
Gain on sale of discontinued operations, net of tax(7) |
39,170 | 6,268 | — | — | — | |||||||||||||||
Loss from discontinued operations, net of tax (2)(7) |
(17,521 | ) | (306,670 | ) | (235,056 | ) | (132,549 | ) | (145,402 | ) | ||||||||||
Net loss |
$ | (18,808 | ) | $ | (313,085 | ) | $ | (414,307 | ) | $ | (129,564 | ) | $ | (175,990 | ) | |||||
(Loss) income per share from continuing operations — basic and diluted |
$ | (0.81 | ) | $ | (0.26 | ) | $ | (3.67 | ) | $ | 0.06 | $ | (0.65 | ) | ||||||
Gain per share from sale of discontinued operations — basic and diluted |
$ | 0.78 | $ | 0.13 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||||
Loss per share from discontinued operations — basic |
$ | (0.35 | ) | $ | (6.21 | ) | $ | (4.80 | ) | $ | (2.76 | ) | $ | (3.09 | ) | |||||
Loss per share from discontinued operations — diluted |
$ | (0.35 | ) | $ | (6.21 | ) | $ | (4.80 | ) | $ | (2.71 | ) | $ | (3.09 | ) | |||||
Net loss per share — basic |
$ | (0.38 | ) | $ | (6.34 | ) | $ | (8.47 | ) | $ | (2.70 | ) | $ | (3.74 | ) | |||||
Net loss per share — diluted |
$ | (0.38 | ) | $ | (6.34 | ) | $ | (8.47 | ) | $ | (2.65 | ) | $ | (3.74 | ) | |||||
Balance Sheet Data at Fiscal Year End: |
||||||||||||||||||||
Working capital(8) |
$ | 42,047 | $ | 115,617 | $ | 318,360 | $ | 127,635 | $ | 125,856 | ||||||||||
Total assets |
350,201 | 445,284 | 984,365 | 1,571,544 | 1,581,524 | |||||||||||||||
Short-term debt |
28,653 | 40,117 | 80,000 | 80,000 | — | |||||||||||||||
Current portion of long-term debt(9) |
61,400 | 17,707 | 58,000 | 188,375 | 196,825 | |||||||||||||||
Long-term obligations(9) |
290,667 | 394,597 | 474,591 | 540,035 | 599,007 | |||||||||||||||
Shareholders’ (deficit) equity |
(97,778 | ) | (102,416 | ) | 193,742 | 569,170 | 569,093 | |||||||||||||
| (1) | In fiscal 2005, in response to lower market prices and reduced end-customer demand for our products, we recorded $32.3 million of inventory charges to establish additional excess and obsolete inventory reserves and a write-down of inventory to lower of cost or market. |
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| (2) | We adopted FASB ASC 718-10 (Statement of Financial Accounting Standards (SFAS) No. 123(R), “Share-Based Payment,”) on October 1, 2005. As a result, stock-based compensation expense included within cost of goods sold, research and development expense, and selling, general and administrative expense in fiscal 2009, 2008, 2007 and 2006 is based on the fair value of all stock options, stock awards and employee stock purchase plan shares. Stock-based compensation expense for earlier periods is based on the intrinsic value of acquired or exchanged unvested stock options in business combinations, which is in accordance with previous accounting standards. Non-cash employee stock-based compensation expense included in our consolidated statements of operations was as follows (in thousands): |
| Fiscal Year Ended | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Cost of goods sold |
$ | 247 | $ | 370 | $ | 426 | $ | 382 | $ | — | ||||||||||
Research and development |
869 | 2,725 | 6,157 | 9,249 | 3,027 | |||||||||||||||
Selling, general and administrative |
3,736 | 9,185 | 7,271 | 19,312 | 1,881 | |||||||||||||||
Loss from discontinued operations,
net of tax |
868 | 3,589 | 5,897 | 16,632 | 7,142 | |||||||||||||||
| (3) | In fiscal 2006, Conexant and Jazz Semiconductor, Inc. (Jazz) terminated a wafer supply and services agreement. In lieu of credits towards future purchases of product from Jazz, we received additional shares of Jazz common stock and recorded a gain of $17.5 million. | |
| (4) | In fiscal 2009, we recorded a $12.9 million gain on sale of intellectual property. | |
| (5) | In fiscal 2007, we recorded $184.7 million of goodwill impairment charges, $30.3 million of intangible impairment charges and $6.1 million of property, plant and equipment impairment charges associated with our Embedded Wireless Network products. | |
| (6) | Special charges include the following related to the settlement of legal matters and restructuring charges (in thousands): |
| Fiscal Year Ended | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Legal settlements |
$ | 3,475 | $ | — | $ | 1,497 | $ | — | $ | 3,255 | ||||||||||
Restructuring charges |
15,116 | 11,539 | 7,227 | 3,641 | 18,707 | |||||||||||||||
| (7) | As a result of our decision to sell certain assets and liabilities of the BMP and BBA business units in fiscal 2008 and 2009, respectively, the results of the BMP and BBA business and the gain on sale of the BMP business are reported as discontinued operations for all periods presented. | |
| (8) | Working capital is defined as current assets minus current liabilities. | |
| Beginning in March 2006, we consider our available-for-sale portfolio as available for use in our current operations. Accordingly, from that date we have classified all marketable securities as short-term, even though the stated maturity dates may be more than one year beyond the current balance sheet date. Prior to March 2006, short-term marketable securities consisted of debt securities with remaining maturity dates of one year or less and equity securities of publicly-traded companies, and long-term marketable securities consisted of debt securities with remaining maturity dates of greater than one year. For periods prior to March 2006, long-term marketable securities are excluded from the calculation of working capital. | ||
| Beginning in March 2006, we reclassified the long-term portion of our restructuring accruals, principally consisting of future rental commitments under operating leases, from current liabilities to other long-term liabilities on our consolidated balance sheet. The long-term portion of restructuring accruals for all prior periods have been similarly reclassified. These reclassifications did not affect our total assets, total liabilities, total shareholders’ equity, results of operations or cash flows and did not have a material impact on current liabilities, long-term liabilities or the calculation of working capital for any period presented. |
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| In November 2006, we issued $275.0 million aggregate principal amount of floating rate senior secured notes due November 2010. Proceeds from this issuance, net of fees, were approximately $268.1 million. We used the net proceeds of this offering, together with available cash, cash equivalents and marketable securities on hand, to retire our outstanding $456.5 million aggregate principal amount of convertible subordinated notes in February 2007. Because the net proceeds from this offering were used to repay at maturity a portion of the convertible subordinated notes due February 2007, $268.1 million of the $456.5 million convertible subordinated notes has been reclassified as long-term debt on our consolidated balance sheet as of September 29, 2006, as required by the Segment Reporting topics of the FASB ASC 470-10 (SFAS No. 6, “Classification of Short-Term Obligations Expected to Be Refinanced”). | ||
| Subsequent to October 2, 2009, the Company issued a redemption notice announcing that it will redeem all of the remaining $61.4 million senior secured notes on December 18, 2009. The redemption price will be equal to 101% of the principal amount of the senior secured notes plus accrued and unpaid interest to the redemption date. Accordingly, the remaining $61.4 million senior secured notes have been classified as current in the Company’s consolidated balance sheets as of October 2, 2009. | ||
| (9) | As discussed in note (8) above, $268.1 million of the $456.5 million convertible subordinated notes due February 2007 were reclassified as long-term debt on our consolidated balance sheet as of September 29, 2006, as required by the Segment Reporting topics of the FASB ASC 470-10 (SFAS No. 6, “Classification of Short-Term Obligations Expected to Be Refinanced”). |
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