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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): August 8, 2000
CONEXANT SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 000-24923 25-1799439
(STATE OR JURISDICTION (COMMISSION FILE NUMBER) (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
4311 JAMBOREE ROAD
NEWPORT BEACH, CA 92660
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 483-4600
N/A
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 5. OTHER EVENTS
On March 10, 2000, Conexant Systems, Inc. ("Conexant" or the "Company")
completed its previously-announced acquisition of Maker Communications, Inc.
("Maker"), a leading provider of programmable, high-performance network
processors, software solutions and development tools. Maker will operate as part
of Conexant's Network Access Division. Conexant will also use the Maker
facilities as the Company's base of operations in the eastern U.S. for its
network access business.
Conexant issued 0.66 of a share of its common stock, par value $1.00 per share,
in exchange for each share of Maker common stock, par value $0.01 per share. The
total value of the consideration for the acquisition of Maker was approximately
$979.6 million, based on the closing price of Conexant common stock on December
17, 1999 ($69.625). The transaction was accounted for as a purchase.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Not applicable.
(b) Pro forma financial information
Unaudited pro forma condensed combined financial information is
included at pages F-1 through F-4 of this report.
(c) Exhibits
Not applicable.
SIGNATURES
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)
Date: August 8, 2000 By /s/ Dennis E. O'Reilly
-----------------------------------
Dennis E. O'Reilly
Senior Vice President,
General Counsel and Secretary
2
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Combined Financial Information for
Conexant gives effect to the merger with Maker. The historical financial
information for Conexant set forth below has been derived from, and is qualified
by reference to, the consolidated financial statements of Conexant included in
Conexant's Annual Report on Form 10-K for the year ended September 30, 1999 and
Conexant's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2000. The historical financial information for Maker for the year ended December
31, 1999 is derived from the consolidated financial statements of Maker included
in Conexant's Form 8-K Current Report dated April 3, 2000. The Unaudited Pro
Forma Condensed Combined Statements of Operations for the fiscal year ended
September 30, 1999 and for the nine months ended June 30, 2000 give effect to
the merger as if it had occurred on October 1, 1998.
The merger was accounted for under the purchase method of accounting. Under the
terms of the merger, each share of Maker was exchanged for 0.66 shares of
Conexant common stock. Based upon the market price of Conexant's common stock on
December 17, 1999, the total value of the merger consideration was approximately
$979.6 million. The value of the merger consideration was allocated to the
assets and liabilities acquired, including identified intangibles of $178.6
million and in-process research and development ("IPRD") of $118.5 million,
based upon estimated fair values. The fair values of the identified intangibles
and IPRD were based upon an independent appraisal. The excess of the value of
the merger consideration over the net assets acquired was allocated to goodwill.
Upon completion of the merger, Conexant recorded a $118.5 million charge for the
fair value of the IPRD, because the technological feasibility of the products
under development had not been established and no future alternative uses
existed. This non-recurring charge is reflected in Conexant's historical
statement of operations for the nine months ended June 30, 2000. The Unaudited
Pro Forma Condensed Combined Statements of Operations do not give effect to any
synergies which may be realized as a result of the merger. Additionally, except
for the charge for IPRD and as indicated in the notes hereto, the Unaudited Pro
Forma Condensed Combined Statements of Operations do not reflect any
nonrecurring charges incurred as a result of the merger with Maker.
The Unaudited Pro Forma Condensed Combined Statements of Operations are provided
for informational purposes only and do not purport to present the combined
financial position or results of operations of Conexant and Maker that would
have been achieved had the merger occurred on the date specified, nor are they
necessarily indicative of the results of operations that may be expected in the
future.
F-1
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA
CONEXANT(1) MAKER(1) ADJUSTMENTS PRO FORMA
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net revenues........................ $1,444,114 $15,684 $ -- $1,459,798
Cost of goods sold.................. 863,252 5,099 -- 868,351
---------- ------- --------- ----------
Gross margin........................ 580,862 10,585 -- 591,447
Operating expenses:
Research and development............ 310,042 5,936 -- 315,978
Selling, general and
administrative.................... 227,729 4,489 1,870 (3) 234,088
Amortization of intangibles......... 8,364 -- 178,830 (4) 187,194
Special charges -- Rockwell retained
assets............................ 20,000 -- -- 20,000
Special charges -- Other............ 17,906 -- -- 17,906
---------- ------- --------- ----------
Total operating expenses.. 584,041 10,425 180,700 775,166
---------- ------- --------- ----------
Operating income (loss)............. (3,179) 160 (180,700) (183,719)
Other income, net................... 5,935 2,127 -- 8,062
---------- ------- --------- ----------
Income (loss) before (benefit)
provision for income taxes........ 2,756 2,287 (180,700) (175,657)
(Benefit) provision for income
taxes............................. (10,173) 91 (14,353)(5) (24,435)
---------- ------- --------- ----------
Net income (loss)................... $ 12,929 $ 2,196 $(166,347) $ (151,222)
========== ======= ========= ==========
Net income (loss) per share(6):
Basic............................. $ 0.07 $ 0.16 $ (0.74)(7)
Diluted........................... $ 0.06 $ 0.12 $ (0.74)(7)
Number of shares used in per share
computation(6):
Basic............................. 192,551 14,039 205,202(7)
Diluted........................... 203,484 19,083 205,202(7)
</TABLE>
See accompanying notes to Unaudited Pro Forma
Condensed Combined Financial Information.
F-2
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA
CONEXANT(2) MAKER(2) ADJUSTMENTS PRO FORMA
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net revenues........................ $1,542,165 $7,829 $ -- $1,549,994
Cost of goods sold.................. 829,090 2,726 -- 831,816
---------- -------- -------- ----------
Gross margin........................ 713,075 5,103 -- 718,178
Operating expenses:
Research and development............ 294,589 2,988 -- 297,577
Selling, general and
administrative.................... 205,209 2,565 -- 207,774
Amortization of intangibles......... 83,603 -- 72,220(4) 155,823
Purchased in-process
research and development (8)..... 196,362 -- -- 196,362
Merger costs (9).................... -- 16,337 -- 16,337
--------- -------- -------- ----------
Total operating expenses.. 779,763 21,890 72,220 873,873
--------- -------- -------- ----------
Operating loss...................... (66,688) (16,787) (72,220) (155,695)
Other income, net................... 3,592 1,314 -- 4,906
--------- -------- -------- ----------
Loss before provision for income
taxes............................. (63,096) (15,473) (72,220) (150,789)
Provision for income taxes.......... 70,736 45 (5,508)(5) 65,273
--------- -------- -------- ----------
Net loss ........................... $(133,832) $(15,518) $(66,712) $ (216,062)
========= ======== ======== ==========
Net loss per share:
Basic............................. $ (0.65) $ (0.98)(7)
Diluted........................... $ (0.65) $ (0.98)(7)
Number of shares used in per share
computation:
Basic............................. 206,735 219,386(7)
Diluted........................... 206,735 219,386(7)
</TABLE>
See accompanying notes to Unaudited Pro Forma
Condensed Combined Financial Information.
F-3
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Pro forma adjustments for the unaudited pro forma condensed combined statements
of operations for the year ended September 30, 1999 and for the nine months
ended June 30, 2000 are as follows:
(1) Conexant reports its financial information on the basis of a September 30
fiscal year. Maker reported its financial information on the basis of a
December 31 fiscal year. The Unaudited Pro Forma Condensed Combined
Statement of Operations for the fiscal year ended September 30, 1999
includes Conexant's historical results of operations for the fiscal year
ended September 30, 1999 and Maker's historical results of operations for
the year ended December 31, 1999.
(2) Conexant's historical results of operations for the nine months ended June
30, 2000 include the results of Maker for the period subsequent to the
completion of the merger. The Maker historical results of operations
represent its operations for the period from October 1, 1999 up to the
completion of the merger.
(3) Reflects retention bonuses earned by officers of Maker in the twelve month
period subsequent to the closing of the merger.
(4) Reflects the amortization of the identified intangible assets associated
with the merger over an average period of five years and amortization of
goodwill associated with the merger over five years.
(5) Reflects the estimated tax effects of the pro forma adjustments, based upon
Conexant's estimated incremental tax rate of approximately 38.2%. The pro
forma adjustment to the provision for income taxes also reflects a book
deferred tax benefit relating to certain amortization. Although the
amortization of identified intangibles and goodwill is not deductible for
U.S. Federal or state income taxes, in periods subsequent to the merger the
Company will record a deferred tax benefit relating to the amortization of
identified intangible assets.
(6) On November 4, 1998, the board of directors of Rockwell approved the
distribution to its shareowners of all the outstanding shares of the common
stock of its wholly-owned subsidiary, Conexant, by means of a tax-free
spin-off. The distribution occurred at the close of business on December
31, 1998. The fiscal 1999 financial statements include the operating
results of Conexant while it was part of Rockwell prior to the
distribution. Because Conexant was not an independent company during all of
its fiscal year ended September 30, 1999, the Conexant historical net
income per share represents a pro forma net income per share presented as
if the distribution had occurred as of October 1, 1998.
(7) Pro forma net loss reflects the impact of the adjustments above. Pro forma
basic and diluted net loss per share is computed using the weighted-average
number of shares of common stock outstanding after the issuance of
approximately 12,651,000 shares of Conexant common stock to acquire the
outstanding shares of Maker common stock. Pro forma diluted net loss per
share does not include the effect of potentially dilutive options or
convertible debt securities as such securities are antidilutive.
(8) In connection with the merger with Maker and other acquisitions completed
during fiscal 2000, an aggregate of $196.4 million was allocated to IPRD,
based upon estimated fair values. The fair value of the IPRD acquired was
expensed immediately upon completion of the acquisitions because the
technological feasibility of products under development had not been
established and no future alternative uses existed.
(9) Upon completion of the merger, Maker incurred merger costs of $16.3
million, including investment banking, professional, and other
merger-related costs. This non-recurring charge is reflected in Maker's
historical statement of operations for the nine months ended June 30, 2000.
F-4
