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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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):
January 20, 1999 (January 19, 1999)
CONEXANT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-24923 25-1799439
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
4311 Jamboree Road, Newport Beach, California 92660-3095
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (949) 483-4600
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<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
Registrant's press release dated January 19, 1999 is filed herewith
as Exhibit 20 and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
20 Press release of Registrant dated January 19, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONEXANT SYSTEMS, INC.
(Registrant)
By /s/ Dennis E. O'Reilly
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Dennis E. O'Reilly
Senior Vice President,
General Counsel and
Secretary
Dated: January 20, 1999
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ------------
20 Press release of Registrant dated January 19,
1999.
Editorial contact: Investor relations contact:
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Eileen Algaze Mike Cortright
Conexant Systems, Inc. Conexant Systems, Inc.
(949) 483-6849 (949) 483-6773
[email protected] [email protected]
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www.conexant.com
CONEXANT ANNOUNCES FIRST QUARTER RESULTS
PERFORMANCE IMPROVEMENTS ON TRACK AND 11 PERCENT SEQUENTIAL REVENUE GROWTH
NEWPORT BEACH, Calif., Jan. 19,1999 - Conexant Systems, Inc. (NASDAQ:CNXT),
which was spun-off from Rockwell International on December 31, 1998, today
announced revenues of $294.7 million for the first fiscal quarter ended
January 1, 1999, up 11 percent over the $264.6 million in revenues reported for
the fourth quarter of 1998. The company reported a net loss of $57.1 million,
or $.60 per share on a pro-forma basis, compared to a net loss of $233.8
million in the prior quarter.
Revenues in the comparable first quarter of fiscal 1998 were $383.4
million, resulting in net income of $20.6 million.
The company's first-quarter loss on a pre-tax basis was $97.3 million,
which included $91 million in unusual and special charges, detailed in the First
Quarter Charges section below.
"Our performance improvement program is on track as we start to reap the
benefits of our restructuring activities," said Dwight W. Decker, chairman and
chief executive officer of Conexant. "Excluding the various one-time charges,
we were approaching break-even performance for the quarter.
-more-
<PAGE>
Conexant Q1 earnings 2-2-2
"Revenue growth was led by the seasonally strong performance of our
Personal Computing Division, which also experienced slower-than-expected modem
price erosion. In addition, we are encouraged by the order activity and design
wins achieved during the quarter in our expansion platforms: the Wireless
Communications, Network Access, Personal Imaging and Digital Infotainment
divisions," Decker said.
"Based on our first quarter performance and current order visibility, our
expectations for the second quarter are stronger than they were 90 days ago.
The sequential revenue decline anticipated in our seasonally weak second quarter
should be between five and ten percent, less than previously expected," said
Decker.
"In addition, with improved factory utilization, and
elimination of the costs associated with our restructuring and spin-off
programs, we believe we can deliver gross margins of between 38 and 42 percent
of revenue. At the same time, operating expenses should decline by approximately
10 percent from reported first quarter levels.
"Most importantly, we remain on track for a return to profitability in the
second half of calendar 1999," Decker added.
-more-
<PAGE>
Conexant Q1 earnings 3-3-3
FIRST QUARTER CHARGES
The company's first-quarter loss included $91 million in unusual and special
pre-tax charges:
- $40 million related primarily to unusually high inventory costs, flowing
through cost of sales, as a result of lower manufacturing capacity
utilization over the last four months of fiscal 1998.
- $13 million of operating expenses was associated with Conexant's new
corporate identity campaign, payroll-related restructuring costs and
corporate set-up expenses.
- A special charge of $18 million resulted from the voluntary employee
retirement program completed by the company during the quarter.
- An additional special charge of $20 million resulted from Rockwell's recent
decision to further write-down wafer fabrication facilities in Colorado
Springs, Colo., which were retained by Rockwell as part of the Conexant
spin-off. Accounting rules require that this non-cash charge be reported in
Conexant's last quarterly results as a subsidiary of Rockwell.
FIRST QUARTER PRODUCT HIGHLIGHTS
- The Network Access Division began volume shipments of the first product in
its AnyPort (trademark) family of remote access Internet concentrators. The
high density, three-port-per-chip CSMV/3 offers Internet service providers
integrated Voice-over-IP and data access in a complete system-level
semiconductor solution. The AnyPort family is designed to meet the growing
demand for multi-service remote access driven by the convergence of voice
and data networking.
-more-
<PAGE>
Conexant Q1 earnings 4-4-4
- During the quarter, the Wireless Communications Division shipped its
25-millionth digital cellular power amplifier device since entering this
market segment in 1996. Conexant is the leading provider of these devices
in the code division multiple access (CDMA) cellular and personal
communications systems (PCS) handset segments, and is currently shipping in
excess of two million power amplifiers per month.
- The Personal Imaging Division announced a family of high performance,
multi-function peripheral (MFP) chipsets, the first complete system
solutions enabling color inkjet printing capability with black-and-white
scan, copy and fax functionality.
- Enabling simple and affordable networking in the home, the Personal
Computer Division began volume shipments of its LANfinity (trademark)
family of home networking chipsets to retail PC add-in card manufacturers.
The division also commenced volume shipments of its RipTide (trademark)
combination audio/modem chipset to Hewlett Packard and other personal
computer manufacturers. Expanding the applications for analog modems, the
division shipped almost 500,000 modems for use in the Sega Dreamcast
next-generation gaming platform offering Internet multi-player
capabilities.
-more-
<PAGE>
Conexant Q1 earnings 5-5-5
SAFE HARBOR STATEMENT
This press release contains statements relating to future results of the
company (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: global and market conditions, including, but
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 and extent
of utilization of manufacturing capacity; pricing pressures and other
competitive factors; changes in product mix; fluctuations in manufacturing
yields; product obsolescence; the ability to develop and implement new
technologies and to obtain protection of the related intellectual property; the
successful implementation of the company's diversification strategy and
restructuring plan; labor relations of the company, its customers and suppliers;
timely completion of Year 2000 modifications by the company and its key
suppliers and customers; and the uncertainties of litigation, as well as other
risks and uncertainties, including but not limited to those detailed from time
to time in the company's Securities and Exchange Commission filings. These
forward-looking statements are made only as of the date hereof, and the company
undertakes no obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise. Other
brands and names contained in this release are the property of their respective
owners.
Conexant Systems, Inc. is the $1.2 billion company that was created when
Rockwell International Corporation spun off its semiconductor systems business
to shareowners in December 1998. Conexant is the world's largest independent
company focused exclusively on providing semiconductor products for
communications electronics. With more than 30 years of experience in developing
analog modem technology, the company draws upon its expertise in mixed-signal
processing and communications technology to deliver integrated systems and
semiconductor products for a broad range of communications applications. These
products facilitate communications worldwide through wireline voice and data
communications networks, cordless and cellular wireless telephony systems,
personal imaging devices and equipment, and emerging cable and wireless
broadband communications networks. The company aligns its business into five
product platforms: Personal Computing, Personal Imaging, Wireless
Communications, Digital Infotainment, and Network Access.
# # #
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<TABLE>
<CAPTION>
CONEXANT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands except for per share
(Unaudited)
Three Months Ended,
---------------------------------------------------------------
01/01/99 09/30/98 01/02/98
------------------- ------------------- -------------------
<S> <C> <C> <C>
Net sales $294,678 $264,593 $383,452
Cost of sales 221,680 352,341 208,509
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Gross margin 72,998 (87,748) 174,943
Research & development 69,553 86,631 82,093
Selling, general & administrative 64,016 60,607 59,542
Special charges - Rockwell retained assets 20,000 -- --
Special charges - other 17,906 147,306 --
------------------- ------------------- -------------------
Operating (loss) earnings (98,477) (382,292) 33,308
Other income, net 1,163 4,266 4,483
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(Loss) income before income taxes (97,314) (378,026) 37,791
(Benefit) provision for income taxes (40,191) (144,273) 17,225
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Net (loss) income $(57,123) $(233,753) $20,566
=================== =================== ====================
Pro forma net (loss) per share $(0.60)
Pro forma weighted average outstanding shares 94,935
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</TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands
<TABLE>
<CAPTION>
01/01/99 09/30/98
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(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $13,282 $14,000
Restricted cash 64,000 --
Accounts receivable 135,780 166,386
Inventories 142,050 200,926
Deferred income taxes 90,024 152,559
Assets held for disposal -- 42,346
Other current assets 9,517 10,735
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TOTAL CURRENT ASSETS 454,653 586,952
Property, plant & equipment, net 682,968 713,400
Other assets 115,303 118,178
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TOTAL ASSETS $1,252,924 $1,418,530
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TOTAL CURRENT LIABILITIES $289,885 $330,263
OTHER LONG-TERM OBLIGATIONS 65,967 78,892
Rockwell's net investment -- 1,009,375
Common stock 94,882 --
Additional paid-in capital 802,190 --
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TOTAL SHAREHOLDERS' EQUITY 897,072 1,009,375
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,252,924 $1,418,530
================= ==================
</TABLE>
<PAGE>
CONEXANT SYSTEMS, INC.
SELECTED CORPORATE DATA
(Unaudited)
BUSINESS PLATFORM OVERVIEW
- --------------------------
<TABLE>
<CAPTION>
Three Months Ended,
------------------------------------------------------------------------------
01/01/99 09/30/98 01/02/98
----------------------- ----------------------- ----------------------
% of Sales Revenue % of Sales Revenue % of Sales Revenue
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Personal Computing 51% $152M 43% $115M 61% $233M
Personal Imaging 6% $16M 8% $21M 8% $32M
Digital Infotainment 14% $40M 13% $35M 11% $41M
Network Access 14% $42M 16% $42M 9% $34M
Wireless Communications 15% $45M 20% $52M 11% $43M
</TABLE>
OTHER DATA
- ----------
<TABLE>
<CAPTION>
Three Months Ended,
-----------------------------------------------
01/01/99 09/30/98 01/02/98
------------ ------------ ------------
<S> <C> <C> <C>
Depreciation and Amortization $52M $66M $47M
Capital Expenditures $15M $76M $43M
Headcount 5,946 6,291 6,187
</TABLE>
