EX-99.2 9 ex99-2.htm ex99-2

EXHIBIT 99.2

ADDITIONAL INFORMATION RECONCILING THE NON-GAAP FINANCIAL MEASURES CONTAINED IN THE 2002 SHAREHOLDERS LETTER TO THE MOST DIRECTLY COMPARABLE FINANCIAL MEASURES CALCULATED IN ACCORDANCE WITH GAAP.

CONTENTS

Our 2002 Annual Report includes our 2002 letter to shareholders. Our 2002 letter to shareholders discloses annual and quarterly pro forma financial data. We are providing this supplemental data, which discloses GAAP financial data and a reconciliation between the pro forma and GAAP financial data. The disclosure of the GAAP financial data and a reconciliation of the pro forma to GAAP financial data is required to be provided by Securities and Exchange Commission rules, whenever we release pro forma financial data to the public.

  Page
   
   
GAAP Annual Summary Financial Data 1
   
Reconciliation from GAAP to Proforma Annual Financial Data 2
   
GAAP Quarterly Summary Financial Data 3
   
Reconciliation from GAAP to Proforma Quarterly Financial Data - Excluded Items 4
   
GAAP Cash Flow Annual Summary 5
   
Reconciliation from GAAP Cash Flow Annual Summary to Pro Forma Cash Flow Annual Summary 6

GAAP Annual Summary Financial Data

(In millions except per-share data)                                        
  Year Ended
  2002   2001   2000   1999   1998  
Revenues $       775       $       819       $       1,288       $       745       $       589  
      Cost of revenues $   443   $   552   $   565   $   409   $   430  
Gross margin $   332   $   267   $   723   $   336   $   159  
      Research and development $   288   $   268   $   184   $   137   $   117  
      Selling, general and administrative $   152   $   166   $   154   $   113   $   97  
      Acquisition and other non-recurring costs $   85   $   161   $   56   $   38   $   -    
      Restructuring $   38   $   132   $   -     $   (4 ) $   61  
Total operating costs and expenses $   563   $   727   $   394   $   284   $   275  
Operating income (loss) $   (231 ) $   (460 ) $   329   $   52   $   (116 )
      Other income and (expense) $   (15 ) $   23   $   41   $   43   $   3  
Income (loss) before income taxes $   (246 ) $   (437 ) $   370   $   95   $   (113 )
      (Provision) benefit for income taxes $   (3 ) $   30   $   (93 ) $   (7 ) $   11  
Net income (loss) $   (249 ) $   (407 ) $   277   $   88   $   (102 )
                                         
Net income (loss) per share:                                        
      Basic $   (2.01 ) $   (3.28 ) $   2.29   $   0.81   $ (0.97 )
      Dilluted $   (2.01 ) $   (3.28 ) $   1.92   $   0.76   $ (0.97 )
                                         
Weighted average common and common equivalent                                        
shares outstanding:                                        
         Basic     124       124       121       108       105  
         Diluted     124       124       144       116       105  
Percent of revenue                                        
   Gross margin     43 %     33 %     56 %     45 %     27 %
   Research & development     37 %     33 %     14 %     18 %     20 %
   Selling, general & administrative     20 %     20 %     12 %     15 %     16 %
   Acquisition and other non-recurring costs     11 %     20 %     4 %     5 %     0 %
   Restructuring     5 %     16 %     0 %     -1 %     10 %
   Operating income (loss)     -30 %     -56 %     26 %     7 %     -20 %

1

Reconciliation from GAAP to Pro Forma Annual Financial Data
Items excluded from GAAP to Prepare Pro Forma

(In millions except per-share data)                              
(Unaudited) Year Ended
  2002   2001   2000   1999   1998  
Revenues $      -       $      -       $      -       $      -       $      -  
   Cost of revenues   1     8     -     1     -  
Gross margin   (1 )   (8 )   -     (1 )   -  
   Research and development   38     33     3     -     -  
   Selling, general and administrative   20     12     2     -     -  
   Acquisition and other non-recurring costs   85     161     56     38     -  
   Restructuring   38     132     -     (4 )   61  
Total operating costs and expenses 181     338     61     34     61  
Operating income (loss) (182 )   (346 )   (61 )   (35 )   (61 )
   Other income and (expense)   (13 )   (1 )   9     36     -  
Income (loss) before income taxes (195 )   (347 )   (52 )   1     (61 )
   (Provision) benefit for income taxes   (17 )   17     -     (1 )   6  
Net income (loss) (212 )   (330 )   (52 )   -     (55 )
                               
Net income (loss) per share:                              
   Basic (1.98 )   (2.66 )   (0.43 )   -     (0.53 )
   Diluted (1.98 )   (2.66 )   (0.47 )   -     (0.53 )
                               
Reconciling Items                              
(In millions)                              
Cost of revenues                              
   Acquisition-related costs   (1 )   (4 ) $ -     (1 ) $ -  
   Restructuring charges   -     -     -     -     -  
   Impairments, asset write-downs & other   -     (4 )   -     -     -  
Research and development                              
   Acquisition-related costs   (38 )   (26 )   (3 )   -     -  
   Impairments, asset write-downs & other   -     (7 )   -     -     -  
Selling, general and administrative                              
   Acquisition-related costs   (5 )   (11 )   (2 )   -     -  
   Impairments, asset write-downs & other   -     (1 )   -     -     -  
   Employee loan reserve   (15 )   -     -     -     -  
Acquisition and other non-recurring costs                              
   Acquisition-related costs   (44 )   (96 )   (56 )   (38 )   -  
   Impairments, asset write-downs & other   (41 )   (65 )   -     -     -  
Restructuring                              
   Restructuring charges   (38 )   (132 )   -     4     (61 )
Other income and expenses                              
   Impairments, asset write-downs & other   (19 )   (8 )   -     -     -  
   Gain on sales of assets/investments   -     -     11     36     -  
   Gain on retirement of bonds   6     7     -     -     -  
   Writeoff of bond costs   -     -     (2 )   -     -  
Tax                              
   Provision for income taxes   (17 )   17     -     (1 )   6  
 
Total reconciling items (212 )   (330 )   (52 ) $ -     (55 )

2

GAAP Quarterly Summary Financial Data

(In millions except per-share data)                                                
  Quarter Ended
  Q402   Q302   Q202   Q102   Q401   Q301   Q201   Q101  
Revenues $ 174       $ 205       $ 202       $ 194       $ 191       $ 180       $ 186       $ 262  
      Cost of revenues $ 103   $ 111   $ 111   $ 118   $ 115   $ 208   $ 104   $ 125  
Gross margin $ 71   $ 94   $ 91   $ 76   $ 76   $ (28 ) $ 82   $ 137  
      Research and development $ 63   $ 71   $ 80   $ 74   $ 71   $ 77   $ 62   $ 58  
      Selling, general and administrative $ 31   $ 49   $ 34   $ 38   $ 40   $ 42   $ 38   $ 46  
      Acquisition and other non-recurring costs $ 53   $ 11   $ 10   $ 11   $ 27   $ 92   $ 20   $ 22  
      Restructuring $ 45   $ 2   $ (10 ) $ 1   $ -   $ 132   $ -   $ -  
Total operating costs and expenses $ 192   $ 133   $ 114   $ 124   $ 138   $ 343   $ 120   $ 126  
Operating income (loss) $ (121 ) $ (39 ) $ (23 ) $ (48 ) $ (62 ) $ (371 ) $ (38 ) $ 11  
      Other income and (expense) $ (3 ) $ (16 ) $ (3 ) $ 7   $ 8   $ (4 ) $ 10   $ 9  
Income (loss) before income taxes $ (124 ) $ (55 ) $ (26 ) $ (41 ) $ (54 ) $ (375 ) $ (28 ) $ 20  
      (Provision) benefit for income taxes $ (2 ) $ -   $ (2 ) $ 1   $ 16   $ 13   $ 10   $ (9 )
Net income (loss) $ (126 ) $ (55 ) $ (28 ) $ (40 ) $ (38 ) $ (362 ) $ (18 ) $ 11  
                                                 
Net income (loss) per share:                                                
      Basic $ (1.02 ) $ (0.44 ) $ (0.23 ) $ (0.33 ) $ (0.31 ) $ (2.92 ) $ (0.14 ) $ 0.09  
      Diluted $ (1.02 ) $ (0.44 ) $ (0.23 ) $ (0.33 ) $ (0.31 ) $ (2.92 ) $ (0.14 ) $ 0.08  
                                                 
Weighted average common and common equivalent                                                
shares outstanding:                                                
         Basic   124     124     123     122     121     124     126     126  
         Diluted   124     124     123     122     121     124     126     132  
Percent of revenue                                                
   Gross margin   41 %   46 %   45 %   39 %   40 %   -16 %   44 %   52 %
   Research & development   36 %   35 %   40 %   38 %   37 %   43 %   33 %   22 %
   Selling, general & administrative   18 %   24 %   17 %   20 %   21 %   23 %   20 %   18 %
   Acquisition and other non-recurring costs   30 %   5 %   5 %   6 %   14 %   51 %   11 %   8 %
   Restructuring   26 %   1 %   -5 %   1 %   0 %   73 %   0 %   0 %
   Operating income (loss)   -70 %   -19 %   -11 %   -25 %   -32 %   -206 %   -20 %   4 %

3

Reconciliation from GAAP to Pro Forma Quarterly Financial Data                                
Items excluded from GAAP to Prepare Pro Forma                                                
                                                 
(In millions except per-share data)                                                
(Unaudited) Quarter Ended  
 
Q402   Q302   Q202   Q102   Q401   Q301   Q201   Q101  
 
Revenues $ -       $ -       $ -       $ -       $ -       $ -       $ -       $ -  
   Cost of revenues   -     -     -     1     1     5     2     -  
 
Gross margin   -     -     -     (1 )   (1 )   (5 )   (2 )   -  
   Research and development   2     8     17     11     11     15     5     2  
   Selling, general and administrative   (1 )   16     -     5     2     5     3     2  
   Acquisition and other non-recurring costs   53     11     10     11     27     92     20     22  
   Restructuring   45     2     (10 )   1     -     132     -     -  
 
Total operating costs and expenses   99     37     17     28     40     244     28     26  
 
Operating income (loss)   (99 )   (37 )   (17 )   (29 )   (41 )   (249 )   (30 )   (26 )
   Other income and (expense)   (4 )   (14 )   (1 )   6     7     (8 )   1     (1 )
 
Income (loss) before income taxes   (103 )   (51 )   (18 )   (23 )   (34 )   (257 )   (29 )   (27 )
   (Provision) benefit for income taxes   (8 )   (1 )   (4 )   (4 )   10     (8 )   10     5  
 
Net income (loss)   (111 )   (52 )   (22 )   (27 )   (24 )   (265 )   (19 )   (22 )
                                                 
Net income (loss) per share:                                                
   Basic $ (0.90 ) $ (0.41 ) $ (0.18 ) $ (0.23 ) $ (0.20 ) $ (2.14 ) $ (0.15 ) $ (0.17 )
   Diluted $ (0.90 ) $ (0.41 ) $ (0.18 ) $ (0.23 ) $ (0.20 ) $ (2.14 ) $ (0.15 ) $ (0.17 )
                                                 
Reconciling Items                                                
(In millions)                                                
Cost of revenues                                                
   Acquisition-related costs $ -   $ -   $ -   $ -   $ (1 ) $ (2 ) $ (2 ) $ -  
   Restructuring charges   -     -     -     (1 )   -     -     -     -  
   Impairments, asset write-downs & other   -     -     -     -     -     (3 )   -     -  
Research and development                                                
   Acquisition-related costs   (2 )   (8 )   (17 )   (11 )   (11 )   (8 )   (5 )   (2 )
   Impairments, asset write-downs & other   -     -     -     -     -     (7 )   -     -  
Selling, general and administrative                                                
   Acquisition-related costs   1     (1 )   -     (5 )   (2 )   (3 )   (3 )   (2 )
   Impairments, asset write-downs & other   -     -     -     -     -     (2 )   -     -  
   Employee loan reserve   -     (15 )   -     -     -     -     -     -  
Acquisition and other non-recurring costs                                                
   Acquisition-related costs   (13 )   (11 )   (10 )   (11 )   (27 )   (27 )   (20 )   (22 )
   Impairments, asset write-downs & other   (40 )   -     -     -     -     (65 )   -     -  
Restructuring                                                
   Restructuring charges   (45 )   (2 )   10     (1 )   -     (132 )   -     -  
Other income and expenses                                                
   Impairments, asset write-downs & other   (4 )   (14 )   (1 )   -     -     (8 )   1     (1 )
   Gain on retirement of bonds   -     -     -     6     7     -     -     -  
Tax                                                
   Provision for income taxes   (8 )   (1 )   (4 )   (4 )   10     (8 )   10     5  
 
                                                 
Total reconciling items $ (111 ) $ (52 ) $ (22 ) $ (27 ) $ (24 ) $ (265 ) $ (19 ) $ (22 )
 

4

GAAP Cash Flow Annual Summary            
(In millions) Year Ended  
  2002   2001  
   Net income (loss) $      (249 )      $      (407 )
   Depreciation   211     249  
   Intangibles, restructuring and other   93     185  
   Changes in operating assets and liabilities, net of affects of acquisitions   (33 )   77  
      Net cash flow generated from operating activities   22     104  
             
   Acquisition of property, plant and equipment   (159 )   (177 )
      Subtotal   (137 )   (73 )
             
   Cash flow from other investing and financing activities   114     (368 )
      Net increase (decrease) in cash   (23 )   (441 )
   Cash, cash equivalents and investments, beginning of year   110     551  
   Cash, cash equivalents and investments, end of year $ 87   $ 110  

5

Reconciliation from GAAP Cash Flow Annual Summary to          
Pro Forma Cash Flow Annual Summary          
(In millions, Unaudited) Year Ended
  2002   2001  
   Net income (loss) $      -       $      -  
Depreciation (1)   78     108  
Intangibles, restructuring and other (2)   (78 )   (108 )
Changes in operating assets and liabilities, net of affects of acquisitions   -     -  
      Net cash flow generated from operating activities   -     -  
             
   Acquisition of property, plant and equipment   -     -  
      Subtotal   -     -  
             
   Cash flow from other investing and financing activities   169     301  
      Net increase (decrease) in cash   169     301  
             
   Cash, cash equivalents and investments, beginning of year   (305 )   (606 )
   Cash, cash equivalents and investments, end of year $ (136 ) $ (305 )
             
Reconciling Items              
(In millions)              
  Year Ended
Cashflow from Other Investing and Financing Activities 2002   2001
 
   
Change in Short-term Investments       53                      239      
Change in Long-term Investments   103       76  
Change in Restricted Investments   13       (14 )
   
     
 
    169       301  
   
     
 
               
Cash, Cash Equivalents and Investments - Beginning of Year 2002   2001
 
 
Short-term Investments   95       334  
Long-term Investments   135       211  
Restricted Investments   75       61  
   
     
 
    305       606  
   
     
 
               
Cash, Cash Equivalents and Investments - End of Year 2002   2001
 
 
Short-term Investments   42       95  
Long-term Investments   32       135  
Restricted Investments   62       75  
   
     
 
    136       305  
   
     
 

 

(1)    Amount represents amortization of intangibles which is disclosed in pro forma amounts within “Intangible, restructuring and other”.
   
(2) Difference due to amortization of intangibles - see note (1) above.
   

6