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 27, 2006
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 27, 2006, Registrant released its earnings for the third fiscal quarter of 2006 and is
furnishing a copy of the earnings 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) derivative financial
instruments, 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) certain
non-cash charges related to the Company’s business combinations, primarily the merger with
GlobespanVirata, including charges of $30 million, $40 million and
$70 million in the third quarter of fiscal 2006, the second quarter
of fiscal 2006, and the first nine months of fiscal 2006,
respectively, related to GlobspanVirata’s litigation with Texas Instruments, et al.,(iii) one time charges, integration
costs and other expenses related to the Company’s merger with GlobespanVirata, (iv) restructuring,
asset impairment and other charges related to the Company’s business restructurings and transition
of resources to low cost regions and (v) non-cash stock-based compensation expense related to the
Company’s adopton of SFAS No. 123(R). Management of the Company believes that the Company’s core
results of operations include (i) the sale of its products and related costs and gross margin, (ii)
its on-going cash operating expenses to develop products and related selling, general and
administrative functions, (iii) interest income from its cash and marketable securities and (iv)
its debt service and income tax expense. 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 (loss), non-GAAP net income (loss) and non-GAAP basic and diluted net income
(loss) 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 expense more fully
described in item (a), the gain resulting from the cancellation of a
supply agreement more fully described in item (b), and the
other non-core gains and losses more fully described in item (k) in the GAAP to Non-GAAP Core
Adjustments section of 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 non-cash
and non-core operating expenses more fully described in items
(a), (c) through (f), and (k) 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 (loss), Non-GAAP Core net income (loss), Non-GAAP Core net income
(loss) per share, basic and diluted:
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
(k) in the GAAP to Non-GAAP Core Adjustments section of 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 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 costs and expenses of the Company.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
| 99.1 |
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Press Release of Registrant dated July 27, 2006. |