UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): July 31, 2008
Conexant Systems, Inc.
(Exact name of registrant as specified in its charter)
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| Delaware
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000-24923
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25-1799439 |
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(I.R.S. Employer
Identification No.) |
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4000 MacArthur Boulevard, Newport
Beach, California
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92660 |
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| (Address of principal executive offices)
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(Zip Code) |
Registrant’s telephone number, including area code: 949-483-4600
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
TABLE OF CONTENTS
Item 2.02 Results of Operations and Financial Condition.
On July 31, 2008, Registrant disclosed its earnings for the third fiscal quarter of 2008 in a press
release and is furnishing a copy of the press release to the Securities and Exchange Commission
under Item 2.02 of this Current Report on Form 8-K. In addition, Registrant will discuss its
financial results during a webcast and teleconference call today at 5:00 p.m. (EST). To access the
webcast and teleconference call, go to Registrant’s website at http://www.conexant.com/ir.
The press release is attached herewith as Exhibit 99.1 and is incorporated herein by reference. The
non-GAAP financial measures contained in the attached press release are a supplement to the
corresponding financial measures prepared in accordance with generally accepted accounting
principles (GAAP). The non-GAAP financial measures presented exclude non-cash and non-core
operating and non-operating items as described in the GAAP to Non-GAAP Core Adjustments section in
the press release and in the discussion below. The GAAP to Non-GAAP Core Adjustments exclude (i)
recognized gains and losses related to (a) the sale of equity securities, (b) changes in the fair
value of the warrant to purchase shares of Mindspeed Technologies, Inc. common stock, and (c) other
investments accounted for using the equity method of accounting, held as a result of a series of
transactions that transformed the Company from a broad based communications semiconductor supplier
into a family of focused companies serving distinct markets, (ii) restructuring, asset impairment
and other charges related to the Company’s business restructurings and transition of resources to
low cost regions (iii) amortization of intangible assets resulting from business combinations and (
iv) non-cash stock-based compensation expense. Management of the Company believes that the
Company’s core results of operations include (v) the sale of its products and related costs and
gross margin, (vi) its on-going cash operating expenses to develop products and related selling,
general and administrative functions, (vii) interest income from its cash and (viii) its debt
service and income tax expense.
In addition, the Company has presented its non-GAAP gross margin and non-GAAP operating income
excluding the impact of a non-recurring revenue that resulted from the buyout of a future royalty
stream. Please refer to the Reconciliation of GAAP Financial Measures to Non-GAAP Core Financial
Measures in the press release for a quantitative reconciliation of these non-GAAP financial
measures to the most directly comparable GAAP measures.
The Company has presented non-GAAP gross margin, non-GAAP total operating expenses, non-GAAP
operating income, non-GAAP net (loss) income and non-GAAP basic and diluted net (loss) income per
share, on a basis consistent with its historical presentation to assist investors in understanding
the Company’s core results of operations on an on-going basis. The non-GAAP financial measures also
enhance comparisons of the Company’s core results of operations with historical periods. The
Company is 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 the Company. Management believes that these are important measures
in the evaluation of the Company’s 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 the Company may be different from non-GAAP financial measures used by other companies.
The Company has presented the following non-GAAP financial measures:
1) Non-GAAP Core gross margin;
The use of this non-GAAP financial measure allows management of the Company to quantify and discuss
the core cost of goods sold and gross margins of the business on an on-going basis. Items excluded
from this non-GAAP financial measure consist of the non-cash and non-core expenses and credits more
fully described in items (a) and (f) in the GAAP to Non-GAAP Core Adjustments section of the press
release. The impact of a non-recurring revenue that resulted from the buyout of a future royalty
stream was excluded from the non-GAAP Core gross margin and is described in item (k) in the GAAP to
Non-GAAP Core Adjustments section in the press release. Management presents non-GAAP gross margin
to enable investors to understand the core on-going cost of goods sold and gross margins of the
Company. Management uses this non-GAAP financial measure in its evaluation of the Company’s core
gross margin and trends between fiscal periods and believes this measure is an important component
of its internal performance measurement process. In addition, the Company prepares and maintains
its budgets and forecasts for future periods on a basis consistent with this non-GAAP financial
measure. This non-GAAP financial measure has certain limitations in that it does not reflect all of
the cost of goods sold related to the Company’s business and may not be indicative of the cash
flows from operations as determined in accordance with GAAP. Management compensates for these
limitations by reviewing the Company’s cash flows from operations which include all costs of goods
sold of the Company.
2) Non-GAAP Core operating expenses:
The use of this non-GAAP financial measure allows management of the Company to quantify and discuss
the core operating expenses of the business on an on-going basis. Items excluded from this non-GAAP
financial measure consist of the non-cash and non-core operating expenses and credits more fully
described in items (a) through (e) in the GAAP to Non-GAAP Core Adjustments section of the press
release. Management presents non-GAAP operating expenses to enable investors to understand the core
on-going operating expenses of the Company. Management uses this non-GAAP financial measure in its
evaluation of the Company’s core results of operations and trends between fiscal periods and
believes this measure is an important component of its internal performance measurement process. In
addition, the Company prepares and maintains its budgets and forecasts for future periods on a
basis consistent with this non-GAAP financial measure. This non-GAAP financial measure has certain
limitations in that it does not reflect all of the operating costs and other costs and expenses
related to the Company’s business and may not be indicative of the cash flows from operations as
determined in accordance with GAAP. Management compensates for these limitations by reviewing the
Company’s cash flows from operations which include all operating expenses of the Company.
3) Non-GAAP Core operating income, Non-GAAP Core net (loss) income, and Non-GAAP Core basic and
diluted net (loss) income
per share:
These non-GAAP financial measures are mathematical subtotals, totals and resultant computations
after considering the non-GAAP adjustments and measures discussed above and in items (g) through
(j) in the GAAP to Non-GAAP Core Adjustments section of the press release. The impact of a
non-recurring revenue that resulted from the buyout of a future royalty stream was excluded from
the non-GAAP Core operating income and is described in item (k) in the GAAP to Non-GAAP Core
Adjustments section in the press release. Management presents these non-GAAP financial measures to
enable investors to understand the core on-going results of operations of the Company. Management
uses these non-GAAP financial measures in its evaluation of the Company’s core results of
operations and trends between fiscal periods and believes these measures are an important component
of its internal performance measurement process. In addition, the Company prepares and maintains
its budgets and forecasts for future periods on a basis consistent with these non-GAAP financial
measures. These non-GAAP financial measures have certain limitations in that they do not reflect
all of the operating costs and other income and expenses related to the Company’s business and may
not be indicative of the cash flows from operations as determined in accordance with GAAP.
Management compensates for these limitations by reviewing the Company’s cash flows from operations
which include all operating costs and other income and expenses of the Company.
4) Non-GAAP Core revenue, gross margin, operating expenses, interest expense, provision for income
taxes, (loss) income from continuing operations and basic and diluted net (loss) income per share
including Broadband Media Processing (“BMP”):
These non-GAAP measures presented for the three month period ended June 27, 2008 allow management
of the Company to quantify and discuss the Non-GAAP financial measures outlined in items 1) through
3) discussed above exclusive of the impact of classification of the BMP business unit operations as
discontinued operations for purposes of providing comparability with previously forward looking
statements communicated in their April 29, 2008 earnings release for the period ended March 28,
2008. The forward looking statements presented in the April 29, 2008 earnings release did not
reflect the BMP operating results as discontinued operations as the Company had not finalized the
terms of the sale of the BMP business unit as of that date.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release of Registrant dated July 31, 2008.