8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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) October 29, 2009

CONEXANT SYSTEMS, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware
(State of Incorporation) 000-24923
(Commission
File Number) 25-1799439
(IRS Employer
Identification No.)

4000 MacArthur Boulevard, Newport Beach, California	92660-3095
(Address of Principal Executive Offices)	(Zip Code)

(949) 483-4600
(Registrant’s Telephone Number, Including Area Code)

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.
	Item 9.01 Financial Statements and Exhibits.
SIGNATURE
EXHIBIT INDEX
EX-99.1

Item 2.02 Results of Operations and Financial Condition.

On October 29, 2009, Registrant disclosed its earnings for the third fiscal quarter of 2009 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, (c) other investments accounted for using the equity method of accounting, (d) other than temporary impairment of marketable securities and cost based investments, (e) interest expense adjustments, and (f) the sale of intellectual property, (g) asset impairments, (h) impairment of facility, (i) termination of swap, (ii) restructuring and other charges related to the Company’s business restructurings, (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 net revenues, non-GAAP cost of goods sold, 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 net revenues, non-GAAP cost of goods sold, non-GAAP gross margin, non-GAAP total operating expenses, non-GAAP operating income, non-GAAP other expense (income), non-GAAP income (loss) from continuing operations, and non-GAAP basic and diluted income (loss) from continuing operations 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 net revenues, Non-GAAP Core cost of goods sold and Non-GAAP Core gross margin: the use of these non-GAAP financial measures allows management of the Company to quantify and discuss the core net revenues, the core cost of goods sold and the core gross margins of the business on an on-going basis. Items excluded from these non-GAAP financial measures consist of the non-cash and non-core expenses and credits more

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fully described in items (a) and (f) in the GAAP to Non-GAAP Core Adjustments section of the press release. The impact of non-recurring revenue that resulted from the buyout of a future royalty stream was excluded from non-GAAP Core net revenues and the non-GAAP Core gross margin and is described in item (n) 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 which include all operating costs and other income and expenses of the Company.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits.

99.1 Press Release of Registrant dated October 29, 2009.

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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 hereunto duly authorized.

	CONEXANT SYSTEMS, INC. (Registrant)
Date: October 29, 2009	By:	/s/ MARK PETERSON
		Name:	Mark Peterson
		Title:	Senior Vice President, Chief Legal Officer, and Secretary

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EXHIBIT INDEX

99.1 Press Release of Registrant dated October 29, 2009.

4

EX-99.1

Exhibit 99.1

Editorial Contact:	Investor Relations Contact:
Gwen Carlson	Scott Allen
Conexant Systems, Inc.	Conexant Systems, Inc.
(949) 483-7363	(949) 483-2698

CONEXANT EXCEEDS GUIDANCE FOR FOURTH QUARTER OF FISCAL 2009

Imaging and Audio Businesses Deliver Sequential Growth of 18 Percent, Account for 58 Percent of Total Revenues

     NEWPORT BEACH, Calif., Oct. 29, 2009 — Conexant Systems, Inc. (NASDAQ: CNXT) today announced that financial results for the fourth quarter of fiscal 2009 exceeded the guidance provided at the beginning of the quarter. The company also said that its imaging and audio businesses grew 18 percent on a sequential basis and accounted for 58 percent of total revenues.

Fourth Fiscal Quarter Financial Results

     Conexant presents financial results based on Generally Accepted Accounting Principles (GAAP) as well as select non-GAAP financial measures intended to reflect its core results of operations. The company believes these core financial measures provide investors with additional insight into its underlying operating results. Core financial measures exclude certain non-cash and other non-core items as fully described in the GAAP to non-GAAP reconciliation in the accompanying financial data.

     On August 24, 2009 Conexant announced the completion of the sale of its Broadband Access product lines to Ikanos Communications, Inc. for $54 million. The financial results of the Broadband Access business unit have been classified as discontinued operations in Conexant’s fourth fiscal quarter financial statements.

     Conexant’s core net revenues for the fourth quarter of fiscal 2009 were $56.2 million. Core gross margins were 60.2 percent of revenues. Core operating expenses were $25 million, and core net income was $3.5 million, or $0.07 per share.

     On a GAAP basis, net revenues for the fourth quarter of fiscal 2009 were $56.2 million. GAAP gross margins were 60.4 percent of revenues. GAAP operating expenses of $37 million

included restructuring charges of $5.6 million associated with unutilized leases and a previously announced reduction in force, and asset impairments of $5.6 million. GAAP loss from continuing operations was $7.7 million. GAAP loss from discontinued operations was $5.5 million, offset by a gain of $36.7 million on the sale of the Broadband Access business. GAAP net income was $23.5 million, or $0.47 per diluted share.

     The company ended the quarter with $125.4 million in cash and cash equivalents, compared to $123.4 million in the previous quarter. Fourth fiscal quarter cash and cash equivalents included the initial proceeds of $18.4 million from a public offering of common stock that raised a total amount of $21.2 million. During the quarter, the company retired an aggregate amount of $80 million of its senior secured notes due in November 2010.

Financial-performance and Business Perspective

     “For the fourth fiscal quarter, the Conexant team again delivered performance that exceeded our expectations on all financial metrics,” said Scott Mercer, Conexant’s chairman and chief executive officer. “Fourth quarter revenues of $56.2 million were better than the $54 million we anticipated entering the quarter and increased 10 percent from third quarter revenues of $50.8 million. Fourth quarter core gross margin of 60.2 percent was 40 basis points higher than core gross margin of 59.8 percent in the previous quarter. Core operating expenses of $25 million were lower than the approximately $27 million we anticipated and compared to $26.8 million in the third quarter. Core operating income of $8.8 million was above the $6 million we expected and compared to $3.6 million in the prior quarter. Core net income was $3.5 million, or $0.07 per share, rather than the $0.01 to $0.02 per share we anticipated entering the quarter.

     “In our imaging and audio businesses, where we have focused our product-development and acquisitions efforts, we delivered fourth quarter sequential growth of 18 percent,” Mercer said. “Together, these two businesses accounted for 58 percent of our total revenues.

     “The recent sale of our Broadband Access business represented the completion of our restructuring strategy, which included the termination of new investments in wireless networking, the divestiture of our Broadband Media Processing business, and the strengthening of our product portfolio with targeted acquisitions,” Mercer said. “Conexant today is a company transformed. We are now a smaller, more profitable enterprise focused on delivering operational

excellence and innovative solutions for imaging, audio, embedded-modem, and video applications. In each of these areas, we have established leadership positions.

     “With a proven team, an outstanding IP portfolio, and a customer list that includes worldwide industry leaders, we plan to grow by capturing market share with existing designs and delivering new products for the areas we currently serve. In addition, we plan to apply our core capabilities in analog and mixed-signal design and firmware and software development to capitalize on new opportunities in adjacent markets.”

First Fiscal Quarter Business Outlook

     Conexant expects revenues for the first quarter of fiscal 2010 to be approximately $60 million. Core gross margins for the first quarter are expected to be about 60 percent of revenues. The company anticipates that core operating expenses will be approximately $25 million, which includes reinstatement of performance-based employee incentive plans. As a result, the company expects that first quarter core operating income will be approximately $11 million, with core net income of approximately $0.11 per share based on approximately 60 million shares outstanding.

Conference Call Today

     Financial analysts, members of the media, and the public are invited to participate in a conference call that will take place today at 5:00 p.m. Eastern Time (ET)/ 2:00 p.m. Pacific Time (PT). Conexant senior management will discuss fourth quarter fiscal 2009 financial results and the company’s outlook. To listen to the conference call via telephone, dial 866-650-4882 (in the U.S. and Canada) or 706-679-7338 (from other international locations); participant pass code: Conexant; Conference ID number: 35114866.

     To listen via the Internet, visit the Investor Relations section of Conexant’s Web site at www.conexant.com/ir. Playback of the conference call will be available shortly after the call concludes and will be accessible on Conexant’s Web site at www.conexant.com/ir or by calling 800-642-1687 (in the U.S. and Canada) or 706-645-9291 (from other international locations); Conference ID number: 35114866.

About Conexant

     Conexant’s comprehensive portfolio of innovative semiconductor solutions includes products for imaging, audio, embedded-modem, and video applications. Conexant is a fabless semiconductor company headquartered in Newport Beach, Calif. For more information, visit www.conexant.com

Safe Harbor Statement

     “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as Conexant or its management “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. Similarly, statements in this release that describe our business strategy, outlook, objectives, plans, intentions, or goals are also forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

     These risks and uncertainties include, but are not limited to: the availability of manufacturing capacity; changes in our product mix; pricing pressures and other competitive factors; our ability to timely develop and implement new technologies and to obtain protection for the related intellectual property; the cyclical nature of the semiconductor industry, which is subject to significant downturns that may negatively impact our business, financial condition, cash flow, and results of operations; the cyclical nature of the markets addressed by our products and our customers’ products; volatility in the technology sector and the semiconductor industry; the risk that capital needed for our business and to repay our indebtedness will not be available when needed; our successful development of new products; the timing of our new product introductions and our product quality; demand for and market acceptance of our new and existing products; our ability to anticipate trends and develop products for which there will be market demand; product obsolescence; the ability of our customers to manage inventory; our ability to identify and execute acquisitions, divestitures, mergers or restructurings, as deemed appropriate by management; the financial risks of default by tenants and subtenants in the space we own or lease; the risk that the value of our common stock may be adversely affected by market volatility or failure to meet all applicable listing requirements of the NASDAQ Global Market; the substantial losses we have incurred; the uncertainties of litigation, including claims of infringement of third-party intellectual property rights or demands that we license third-party technology, and the demands it may place on the time and attention of our management and the expense it may place on our company; general economic and political conditions and conditions in the markets we address; and possible disruptions in commerce related to terrorist activity or armed conflict, as well as other risks and uncertainties, including those detailed from time to time in our Securities and Exchange Commission filings.

CONEXANT SYSTEMS, INC.
GAAP Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)

	Fiscal Quarter Ended									Twelve Fiscal Months Ended
	October 2,			July 3,			October 3,			October 2,			October 3,
	2009			2009			2008			2009			2008
Net revenues (Note 1)	$	56,155		$	50,844		$	81,115		$	208,427		$	331,504
Cost of goods sold		22,265			20,533			34,161			86,674			137,251
Gross margin		33,890			30,311			46,954			121,753			194,253
Operating expenses:
Research and development		12,568			12,450			15,072			51,351			58,439
Selling, general and administrative		13,001			14,813			19,172			62,740			77,905
Amortization of intangible assets		429			690			1,383			2,976			3,652
Gain on sale of intellectual property		—			—			—			(12,858	)		—
Asset impairments		5,629			43			23			5,672			277
Special charges (Note 2)		5,373			1,017			3,026			18,983			18,682
Total operating expenses		37,000			29,013			38,676			128,864			158,955
Operating (loss) income		(3,110	)		1,298			8,278			(7,111	)		35,298
Interest expense		5,514			5,035			5,982			21,148			27,804
Other (income) expense, net		(1,570	)		(3,567	)		2,457			(5,025	)		9,223
Loss from continuing operations before income taxes and (loss) gain on equity method investments		(7,054	)		(170	)		(161	)		(23,234	)		(1,729	)
Provision for income taxes		52			176			488			871			849
Loss from continuing operations before (loss) gain on equity method investments		(7,106	)		(346	)		(649	)		(24,105	)		(2,578	)
(Loss) gain on equity method investments		(641	)		(485	)		(808	)		(2,807	)		2,804
(Loss) income from continuing operations		(7,747	)		(831	)		(1,457	)		(26,912	)		226
Gain on sale of discontinued operations, net of tax		36,653			—			6,268			36,653			6,268
(Loss) income from discontinued operations, net of tax		(5,450	)		3,557			(3,894	)		(15,004	)		(306,670	)
Net income (loss)	$	23,456		$	2,726		$	917		$	(5,263	)	$	(300,176	)
(Loss) income per share from continuing operations — basic and diluted	$	(0.15	)	$	(0.02	)	$	(0.03	)	$	(0.54	)	$	0.00
Gain per share on sale of discontinued operations — basic and diluted	$	0.73		$	0.00		$	0.13		$	0.73		$	0.13
(Loss) income per share from discontinued operations — basic	$	(0.11	)	$	0.07		$	(0.08	)	$	(0.30	)	$	(6.21	)
(Loss) income per share from discontinued operations — diluted	$	(0.11	)	$	0.07		$	(0.08	)	$	(0.30	)	$	(6.18	)
Net income (loss) per share — basic	$	0.47		$	0.05		$	0.02		$	(0.11	)	$	(6.08	)
Net income (loss) per share — diluted	$	0.47		$	0.05		$	0.02		$	(0.11	)	$	(6.05	)
Shares used in computing basic per-share computations		50,146			49,867			49,565			49,856			49,394
Shares used in computing diluted per-share computations		50,146			49,867			49,565			49,856			49,653

Note 1 —	Net revenues for the twelve fiscal months ended October 3, 2008 includes $14.7 million for the buyout of a future royalty stream.
Note 2 —	Special charges consist primarily of restructuring charges. Special charges in the twelve fiscal months ended October 2, 2009 also include a $3.5 million charge related to a legal settlement. Special charges in the twelve fiscal months ended October 3, 2008 include a $6.3 million charge related to the termination of our voluntary early retirement plan.

CONEXANT SYSTEMS, INC.
Reconciliation of GAAP Financial Measures to Non-GAAP Core Financial Measures
(unaudited, in thousands, except per share amounts)

	Fiscal Quarter Ended									Twelve Fiscal Months Ended
	October 2,			July 3,			October 3,			October 2,			October 3,
	2009			2009			2008			2009			2008
GAAP net revenues	$	56,155		$	50,844		$	81,115		$	208,427		$	331,504
Royalty buyout (n)		—			—			—			—			(14,700	)
Non-GAAP Core net revenues less impact of royalty buyout	$	56,155		$	50,844		$	81,115		$	208,427		$	316,804
GAAP cost of goods sold	$	22,265		$	20,533		$	34,161		$	86,674		$	137,251
Stock-based compensation (a)		(51	)		(77	)		(60	)		(247	)		(370	)
Other (f)		145			—			(459	)		(466	)		349
Non-GAAP Core cost of goods sold	$	22,359		$	20,456		$	33,642		$	85,961		$	137,230
GAAP gross margin	$	33,890		$	30,311		$	46,954		$	121,753		$	194,253
Gross margin adjustments (a,f)		(94	)		77			519			713			21
Non-GAAP Core gross margin		33,796			30,388			47,473			122,466			194,274
Royalty buyout (n)		—			—			—			—			(14,700	)
Non-GAAP Core gross margin less impact of royalty buyout	$	33,796		$	30,388		$	47,473		$	122,466		$	179,574
GAAP operating expenses	$	37,000		$	29,013		$	38,676		$	128,864		$	158,955
Stock-based compensation (a)		(449	)		(440	)		(2,032	)		(4,605	)		(11,910	)
Amortization of intangible assets (b)		(429	)		(690	)		(1,383	)		(2,976	)		(3,652	)
Gain on sale of intellectual property (c)		—			—			—			12,858			—
Asset impairments (d)		(5,629	)		(43	)		(23	)		(5,672	)		(277	)
Special charges (e)		(5,466	)		(1,033	)		(2,426	)		(18,591	)		(17,895	)
Other (f)		—			—			(800	)		—			(800	)
Non-GAAP Core operating expenses	$	25,027		$	26,807		$	32,012		$	109,878		$	124,421
GAAP operating (loss) income	$	(3,110	)	$	1,298		$	8,278		$	(7,111	)	$	35,298
Gross margin adjustments (a,f)		(94	)		77			519			713			21
Operating expense adjustments (a-f)		11,973			2,206			6,664			18,986			34,534
Non-GAAP Core operating income		8,769			3,581			15,461			12,588			69,853
Royalty buyout (n)		—			—			—			—			(14,700	)
Non-GAAP Core operating income less impact of royalty buyout	$	8,769		$	3,581		$	15,461		$	12,588		$	55,153
GAAP other (income) expense, net	$	(1,570	)	$	(3,567	)	$	2,457		$	(5,025	)	$	9,223
Unrealized gain (loss) on Mindspeed warrant (g)		2,746			1,166			(2,312	)		4,508			(14,974	)
Gain on sale of equity securities (h)		—			1,802			21			1,855			896
Loss on impairment of investments (i)		—			—			—			(2,770	)		—
Loss on impairment of facility (j)		—			—			(1,435	)		—			(1,435	)
Loss on termination of swap (k)		(1,087	)		—			—			(1,087	)		—
Non-GAAP Core other expense (income)	$	89		$	(599	)	$	(1,269	)	$	(2,519	)	$	(6,290	)
GAAP (loss) income from continuing operations	$	(7,747	)	$	(831	)	$	(1,457	)	$	(26,912	)	$	226
Gross margin adjustments (a,f)		(94	)		77			519			713			21
Operating expense adjustments (a-f)		11,973			2,206			6,664			18,986			34,534
Loss (gain) on equity method investments (l)		641			485			808			2,807			(2,804	)
Other (income) expense adjustments (g-k)		(1,659	)		(2,968	)		3,726			(2,506	)		15,513
Interest expense adjustments (m)		380			—			—			380			1,344
Non-GAAP Core income (loss) from continuing operations		3,494			(1,031	)		10,260			(6,532	)		48,834
Royalty buyout (n)		—			—			—			—			(14,700	)
Non-GAAP Core income (loss) from continuing operations less impact of royalty buyout	$	3,494		$	(1,031	)	$	10,260		$	(6,532	)	$	34,134
Basic and Diluted (loss) income per share from continuing operations:
GAAP Basic and Diluted	$	(0.15	)	$	(0.02	)	$	(0.03	)	$	(0.54	)	$	0.00
Non-GAAP Basic	$	0.07		$	(0.02	)	$	0.21		$	(0.13	)	$	0.99
Non-GAAP Diluted	$	0.07		$	(0.02	)	$	0.21		$	(0.13	)	$	0.98
Royalty buyout (n)	$	0.00		$	0.00		$	0.00		$	0.00		$	(0.30	)
Non-GAAP Basic less impact of royalty buyout	$	0.07		$	(0.02	)	$	0.21		$	(0.13	)	$	0.69
Non-GAAP Diluted less impact of royalty buyout	$	0.07		$	(0.02	)	$	0.21		$	(0.13	)	$	0.68
Shares used in basic and diluted per-share computations:
Basic		50,146			49,867			49,565			49,856			49,394
Diluted		50,146			49,867			49,565			49,856			49,653

See “GAAP to Non-GAAP Core Adjustments” below

GAAP to Non-GAAP Core Adjustments:

(a)	Stock-based compensation expense is based on the fair value of all stock options and employee stock purchase plan shares in accordance with SFAS No. 123(R).
(b)	Amortization of intangible assets resulting from business combinations.
(c)	Gain on sale of intellectual property which is not part of our core, on-going operations.
(d)	Asset impairments in the fiscal quarter and twelve fiscal months ended October 2, 2009 consist primarily of $5.0 million for impairment of a patent license with Freescale.
(e)	Special charges consist primarily of restructuring charges. Special charges in the twelve fiscal months ended October 2, 2009 also include a $3.5 million charge related to a legal settlement. Special charges in the twelve fiscal months ended October 3, 2008 include a $6.3 million charge related to the termination of our voluntary early retirement plan.
(f)	The fiscal quarter and twelve fiscal months ended October 2, 2009 and October 3, 2008 include the impact of environmental remediation charges and a charge to inventory acquired through the purchase of the “SigmaTel” multifunction printer imaging product lines. The fiscal quarter and twelve fiscal months ended October 3, 2008 includes purchase accounting expense of in-process research and development acquired through the purchase of the “SigmaTel” multifunction printer imaging product lines.
(g)	Unrealized gain and loss associated with the change in the fair value of our warrant to purchase 6 million shares of Mindspeed Technologies, Inc. common stock, which is accounted for as a derivative instrument.
(h)	Gain on sale of equity securities and on the liquidation of companies in which we held equity securities.
(i)	Losses from other than temporary impairment of marketable securities and cost based investments.
(j)	Loss incurred on a non-cancelable lease obligation related to a facility.
(k)	Loss incurred upon termination of our interest rate swap in connection with repurchase of $80.0 million of floating rate senior notes.
(l)	Loss (gain) on equity method investments.
(m)	Other interest expense which is not part of our on-going operations. For the fiscal quarter and twelve fiscal months ended October 2, 2009, the adjustment relates to the accelerated amortization of debt issuance costs related to the repurchase of $80.0 million of floating rate senior notes. For the twelve fiscal months ended October 3, 2008, the adjustment relates to the accelerated amortization of debt issuance costs related to the repurchase of $53.6 million of floating rate senior notes.
(n)	The twelve fiscal months ended October 3, 2008 includes $14.7 million of non-recurring revenue that resulted from the buyout of a future royalty stream.

Non-GAAP Financial Measures:

We have presented non-GAAP net revenues, non-GAAP cost of goods sold, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP other expense (income), non-GAAP income (loss) from continuing operations, and non-GAAP basic and diluted income (loss) per share from continuing operations, on a basis consistent with our historical presentation to assist investors in understanding our core results of operations on an on-going basis. These non-GAAP financial measures also enhance comparisons of our core results of operations with historical periods. We are 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 our company. Management believes that these are important measures in the evaluation of our 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 us may be different than non-GAAP financial measures presented by other companies.

GAAP Guidance:

We do not present GAAP guidance due to our inability to project (i) future market prices of the common stock of a third party underlying a derivative financial instrument, (ii) realized gains or losses from the sale of equity securities in third parties, and (iii) the financial results of investments accounted for using the equity method of accounting.

CONEXANT SYSTEMS, INC.
Condensed Consolidated Balance Sheets
(unaudited, in thousands)

	October 2,			October 3,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	125,385		$	105,883
Restricted cash		8,500			26,800
Receivables, net		30,110			48,997
Inventories, net		9,216			19,372
Other current assets		26,148			37,938
Current assets held for sale		—			29,730
Total current assets		199,359			268,720
Property, plant and equipment, net		15,299			17,410
Goodwill		109,908			110,412
Other assets		26,284			49,861
Total assets	$	350,850		$	446,403
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Current portion of long-term debt	$	—		$	17,707
Short-term debt		28,653			40,117
Accounts payable		24,553			34,894
Accrued compensation and benefits		8,728			13,201
Other current liabilities		33,978			43,189
Current liabilities to be assumed		—			3,995
Total current liabilities		95,912			153,103
Long-term debt		311,400			373,693
Other liabilities		62,089			56,341
Total liabilities		469,401			583,137
Shareholders’ deficit		(118,551	)		(136,734	)
Total liabilities and shareholders’ deficit	$	350,850		$	446,403

Selected Other Data
(unaudited, in thousands)

	Fiscal Quarter Ended							Twelve Fiscal Months Ended
	October 2,		July 3,		October 3,			October 2,		October 3,
	2009		2009		2008			2009		2008
Revenues By Region:
Americas	$	2,011	$	1,251	$	4,788		$	9,084	$	18,900
Asia-Pacific		53,693		48,989		75,190			196,536		305,835
Europe, Middle East and Africa		451		604		1,137			2,807		6,769
	$	56,155	$	50,844	$	81,115		$	208,427	$	331,504
Cash Flow Data:
Depreciation of PP&E	$	1,603	$	1,936	$	2,532		$	8,198	$	19,311
Capital expenditures	$	168	$	208	$	1,718		$	723	$	5,958
Cash provided by (used in) operations	$	7,534	$	4,773	$	(3,813	)	$	8,216	$	(18,350	)