EXHIBIT 99.1
| Editorial Contact: | Investor Relations Contact: | |
| Thomas Stites | Timea Parris | |
| Mindspeed Technologies, Inc. | Mindspeed Technologies, Inc. | |
| (949) 579-3650 | (949) 579-6283 |
MINDSPEED REPORTS FISCAL 2003 THIRD QUARTER RESULTS
Revenues Up 10% Sequentially With Continuing Reduction in Operating Loss
NEWPORT BEACH, Calif., July 23, 2003– Mindspeed Technologies™, Inc. (AMEX: MND), a leading supplier of semiconductor solutions for network infrastructure applications, today announced revenues of $20.2 million for the third quarter of fiscal 2003, which ended June 27, 2003. Revenues increased 10 percent from second quarter fiscal 2003 revenues of $18.3 million, in line with the company’s upwardly revised outlook provided in mid-June.
“We are very pleased with the market’s reception to our spin-off from Conexant Systems, as well as the positive response from our customers worldwide,” said Raouf Halim, Mindspeed’s chief executive officer. “The Mindspeed team is very excited about the opportunity to achieve success as an independent, focused company and to build significant long-term value for our shareholders.”
During the third quarter, the company’s revenues from the Asia-Pacific region grew 37 percent sequentially, representing 38 percent of total third quarter revenues. Revenues from the Americas and Europe contributed 51 percent and 11 percent of total revenues, respectively.
From an end market perspective, the enterprise market contributed an estimated one third of Mindspeed revenues in the third quarter, with access and metro carrier markets generating approximately two-thirds of revenues.
Mindspeed’s pro forma operating loss for the third quarter of fiscal 2003 was $25.0 million, an improvement of 6 percent over the pro forma operating loss of $26.7 million in the prior quarter. Presented on a GAAP basis, Mindspeed’s operating loss for the third quarter was $43.3 million, as compared to $54.6 million last quarter. Mindspeed’s pro forma net loss for the third quarter was $24.5 million, or $0.27 per share, based on approximately 89 million shares outstanding, an improvement of 9 percent over the pro forma net loss of $26.9 million, or $0.30 per share, in the
prior quarter. Presented on a GAAP basis, the net loss for the third quarter was $42.9 million, or $0.48 per share, compared to $54.9 million, or $0.62 per share last quarter.
The pro forma results, which are a supplement to financials based on generally accepted accounting principles (GAAP), exclude largely non-cash items such as amortization of intangible assets and special items. Mindspeed uses pro forma information to evaluate its operating performance and believes this presentation provides investors with additional insight into underlying operating results. A reconciliation between the pro forma and GAAP results is included in the accompanying financial data.
Fourth Quarter Fiscal 2003 Outlook
“We are continuing to see demand growth in our served markets, largely driven by fiber-to-the-home deployments and early voice-over-packet network infrastructure opportunities in the Asia-Pacific region, as well as shipments of broadband infrastructure equipment worldwide,” said Halim. “Customer order rates are continuing to improve and, as a result, we expect fourth quarter revenues to be up 10 to 15 percent sequentially.”
Mindspeed expects to maintain overall gross margin at roughly 68 percent, and to lower total quarterly operating expenses by at least $3 million dollars. The company therefore expects to improve its pro forma operating loss by 17 to 20 percent.
“We believe that Mindspeed is better positioned today from a product focus, market position, and execution perspective than we have ever been in our history,” said Halim. “We are focused on key metro and access markets, which we expect to grow faster than the overall infrastructure equipment market, and we have an established presence in adjacent enterprise and storage segments. We have a broad product portfolio with significant share capture in multiple, high-value new product design cycles at tier-one equipment manufacturers worldwide.”
About Mindspeed Technologies
Headquartered in Newport Beach, Calif., Mindspeed Technologies™, Inc. designs, develops and sells semiconductor networking solutions for communications applications in enterprise, access, metropolitan and wide area networks.
The company’s three key product families include multiservice access solutions designed to support voice and data services across wireline and wireless networks, T/E carrier physical-layer and link-layer products, and ATM/MPLS network processors. These focused product lines are complemented by a family of high-performance analog transmission and switching solutions.
Mindspeed’s products are used in a wide variety of network infrastructure equipment including voice and media gateways, high-speed routers, switches, access multiplexers, cross-connect systems, add-drop multiplexers and digital loop carrier equipment.
To learn more, visit us at www.mindspeed.com.
Safe Harbor Statement
This press release contains statements relating to future results of Mindspeed (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: the cyclical nature of the semiconductor industry and the markets addressed by the company’s and its customers’ products; availability of capital needed for the company’s business; demand for and market acceptance of new and existing products; successful development of new products; the timing of new product introductions; the availability of manufacturing capacity; pricing pressures and other competitive factors; fluctuations in manufacturing yields; product obsolescence; the ability to develop and implement new technologies and to obtain protection for the related intellectual property; the successful implementation of the company’s expense reduction and restructuring initiatives; the ability to attract and retain qualified personnel; and the uncertainties of litigation, as well as other risks and uncertainties, including 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.
MINDSPEED TECHNOLOGIES, INC.
Pro Forma Consolidated Condensed Statements of Operations
(unaudited, in thousands, except per share amounts)
| Three months ended | Nine months ended June 30, | |||||||||||||||||||||||||
| June 30, 2003 | March 31, 2003 | Dec. 31, 2002 | June 30, 2002 | 2003 | 2002 | |||||||||||||||||||||
| Net revenues | $ | 20,153 | $ | 18,311 | $ | 20,255 | $ | 21,958 | $ | 58,719 | $ | 55,154 | ||||||||||||||
| Cost of goods sold (a) | 6,454 | 5,659 | 6,137 | 7,075 | 18,250 | 21,731 | ||||||||||||||||||||
| Gross margin | 13,699 | 12,652 | 14,118 | 14,883 | 40,469 | 33,423 | ||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Research and development | 26,251 | 26,457 | 31,073 | 42,074 | 83,781 | 128,667 | ||||||||||||||||||||
| Selling, general and administrative | 12,418 | 12,853 | 12,085 | 16,797 | 37,356 | 54,820 | ||||||||||||||||||||
| Total operating expenses | 38,669 | 39,310 | 43,158 | 58,871 | 121,137 | 183,487 | ||||||||||||||||||||
| Pro forma operating loss | (24,970 | ) | (26,658 | ) | (29,040 | ) | (43,988 | ) | (80,668 | ) | (150,064 | ) | ||||||||||||||
| Other income (expense), net | 658 | (122 | ) | (35 | ) | 515 | 501 | (525 | ) | |||||||||||||||||
| Pro forma loss before income taxes | (24,312 | ) | (26,780 | ) | (29,075 | ) | (43,473 | ) | (80,167 | ) | (150,589 | ) | ||||||||||||||
| Provision for income taxes | 202 | 140 | 120 | 253 | 462 | 543 | ||||||||||||||||||||
| Pro forma net loss | $ | (24,514 | ) | $ | (26,920 | ) | $ | (29,195 | ) | $ | (43,726 | ) | $ | (80,629 | ) | $ | (151,132 | ) | ||||||||
| Pro forma net loss per share, basic and diluted | $ | (0.27 | ) | $ | (0.30 | ) | $ | (0.33 | ) | $ | (0.50 | ) | $ | (0.91 | ) | $ | (1.76 | ) | ||||||||
| Number of shares used in per share computation | 89,496 | 88,848 | 88,571 | 86,805 | 88,972 | 85,657 | ||||||||||||||||||||
| Pro forma operating loss, pro forma loss before income taxes, pro forma net loss, and pro forma net loss per share exclude the amortization of intangible assets, special charges, stock compensation and certain non-operating gains and losses. Pro forma net loss and pro forma net loss per share also exclude the cumulative effect of a change in accounting for goodwill. The company believes these measures of earnings provide a better understanding of its underlying operating results and the company uses these measures internally to evaluate its underlying operating performance. These measures of earnings are not in accordance with, or an alternative for, generally accepted accounting principles (GAAP) and may be different from pro forma measures used by other companies. A reconciliation of pro forma net loss presented above with the company’s loss before cumulative effect of accounting change as determined under GAAP is presented in the following table. |
| (a) | Cost of goods sold includes the favorable effect of sales of certain inventories written down to a zero cost basis during fiscal 2001. The favorable effect of such sales, by quarter, was approximately $0.5 million (June 2003), $1.1 million (March 2003), $1.5 million (December 2002) and $1.3 million (June 2002). For the nine months ended June 30, 2003 and 2002, the favorable effect of such sales was $3.1 million and $2.9 million, respectively. |
MINDSPEED TECHNOLOGIES, INC.
Reconciliation of Pro Forma Net Loss to Reported Results
(unaudited, in thousands, except per share amounts)
| Three months ended | Nine months ended June 30, | |||||||||||||||||||||||||
| June 30, 2003 | March 31, 2003 | Dec. 31, 2002 | June 30, 2002 | 2003 | 2002 | |||||||||||||||||||||
| Pro forma net loss | $ | (24,514 | ) | $ | (26,920 | ) | $ | (29,195 | ) | $ | (43,726 | ) | $ | (80,629 | ) | $ | (151,132 | ) | ||||||||
| Amortization of intangible assets and special items: | ||||||||||||||||||||||||||
| Amortization of intangible assets | 12,349 | 12,322 | 14,200 | 80,130 | 38,871 | 240,623 | ||||||||||||||||||||
| Special charges (b) | 6,019 | 16,558 | 3,831 | 118,745 | 26,408 | 125,599 | ||||||||||||||||||||
| Stock compensation | — | (945 | ) | 122 | (198 | ) | (823 | ) | 1,482 | |||||||||||||||||
| Loss before cumulative effect of accounting change | $ | (42,882 | ) | $ | (54,855 | ) | $ | (47,348 | ) | $ | (242,403 | ) | $ | (145,085 | ) | $ | (518,836 | ) | ||||||||
| Loss per share, basic and diluted: | ||||||||||||||||||||||||||
| Pro forma net loss | $ | (0.27 | ) | $ | (0.30 | ) | $ | (0.33 | ) | $ | (0.50 | ) | $ | (0.91 | ) | $ | (1.76 | ) | ||||||||
| Amortization of intangible assets and special items | (0.21 | ) | (0.32 | ) | (0.20 | ) | (2.29 | ) | (0.72 | ) | (4.30 | ) | ||||||||||||||
| Loss before cumulative effect of accounting change | $ | (0.48 | ) | $ | (0.62 | ) | $ | (0.53 | ) | $ | (2.79 | ) | $ | (1.63 | ) | $ | (6.06 | ) | ||||||||
| (b) | Special charges consist of asset impairments, restructuring charges, gains and losses on the disposal of certain assets and certain costs associated with the sale of the company’s NetPlane Systems business. |
MINDSPEED TECHNOLOGIES, INC.
Consolidated Condensed Statements of Operations
(unaudited, in thousands, except per share amounts)
| Three months ended | Nine months ended June 30, | ||||||||||||||||||||||||||
| June 30, 2003 | March 31, 2003 | Dec. 31, 2002 | June 30, 2002 | 2003 | 2002 | ||||||||||||||||||||||
| Net revenues | $ | 20,153 | $ | 18,311 | $ | 20,255 | $ | 21,958 | $ | 58,719 | $ | 55,154 | |||||||||||||||
| Cost of goods sold (c) | 6,454 | 5,659 | 6,137 | 7,075 | 18,250 | 21,731 | |||||||||||||||||||||
| Gross margin | 13,699 | 12,652 | 14,118 | 14,883 | 40,469 | 33,423 | |||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||
| Research and development | 26,251 | 26,190 | 31,152 | 42,034 | 83,593 | 129,769 | |||||||||||||||||||||
| Selling, general and administrative | 12,418 | 13,326 | 12,128 | 16,639 | 37,872 | 55,200 | |||||||||||||||||||||
| Amortization of intangible assets | 12,349 | 12,322 | 14,200 | 80,130 | 38,871 | 240,623 | |||||||||||||||||||||
| Special charges (d) | 6,019 | 15,407 | 3,831 | 118,745 | 25,257 | 125,599 | |||||||||||||||||||||
| Total operating expenses | 57,037 | 67,245 | 61,311 | 257,548 | 185,593 | 551,191 | |||||||||||||||||||||
| Operating loss | (43,338 | ) | (54,593 | ) | (47,193 | ) | (242,665 | ) | (145,124 | ) | (517,768 | ) | |||||||||||||||
| Other income (expense), net | 658 | (122 | ) | (35 | ) | 515 | 501 | (525 | ) | ||||||||||||||||||
| Loss before income taxes | (42,680 | ) | (54,715 | ) | (47,228 | ) | (242,150 | ) | (144,623 | ) | (518,293 | ) | |||||||||||||||
| Provision for income taxes | 202 | 140 | 120 | 253 | 462 | 543 | |||||||||||||||||||||
| Loss before cumulative effect of accounting change | (42,882 | ) | (54,855 | ) | (47,348 | ) | (242,403 | ) | (145,085 | ) | (518,836 | ) | |||||||||||||||
| Cumulative effect of change in accounting for goodwill (e) | — | — | (573,184 | ) | — | (573,184 | ) | — | |||||||||||||||||||
| Net loss | $ | (42,882 | ) | $ | (54,855 | ) | $ | (620,532 | ) | $ | (242,403 | ) | $ | (718,269 | ) | $ | (518,836 | ) | |||||||||
| Loss per share, basic and diluted: | |||||||||||||||||||||||||||
| Loss before cumulative effect of accounting change | $ | (0.48 | ) | $ | (0.62 | ) | $ | (0.53 | ) | $ | (2.79 | ) | $ | (1.63 | ) | $ | (6.06 | ) | |||||||||
| Cumulative effect of change in accounting for goodwill | — | — | (6.48 | ) | — | (6.44 | ) | — | |||||||||||||||||||
| Net loss | $ | (0.48 | ) | $ | (0.62 | ) | $ | (7.01 | ) | $ | (2.79 | ) | $ | (8.07 | ) | $ | (6.06 | ) | |||||||||
| Number of shares used in per share computation | 89,496 | 88,848 | 88,571 | 86,805 | 88,972 | 85,657 | |||||||||||||||||||||
| (c) | Cost of goods sold includes the favorable effect of sales of certain inventories written down to a zero cost basis during fiscal 2001. The favorable effect of such sales, by quarter, was approximately $0.5 million (June 2003), $1.1 million (March 2003), $1.5 million (December 2002) and $1.3 million (June 2002). For the nine months ended June 30, 2003 and 2002, the favorable effect of such sales was $3.1 million and $2.9 million, respectively. | |
| (d) | Special charges consist of asset impairments, restructuring charges and gains and losses on the disposal of certain assets. | |
| (e) | The company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142) as of the beginning of fiscal 2003. During fiscal 2003, the Company completed the required transition impairment test of its goodwill and determined that the carrying value of goodwill exceeded its estimated fair value by $573.2 million. The Company recorded a $573.2 million charge—reflected in the accompanying statement of operations as the cumulative effect of a change in accounting principle—to write down the value of goodwill to estimated fair value. |
MINDSPEED TECHNOLOGIES, INC.
Consolidated Condensed Balance Sheets
(unaudited, in thousands)
| June 30, | September 30, | |||||||||
| 2003 | 2002 | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 101,469 | $ | 7,269 | ||||||
| Receivables, net | 12,074 | 12,568 | ||||||||
| Inventories | 5,025 | 4,842 | ||||||||
| Other current assets | 4,106 | 5,313 | ||||||||
| Total current assets | 122,674 | 29,992 | ||||||||
| Property, plant and equipment, net | 30,988 | 42,854 | ||||||||
| Goodwill | — | 568,900 | ||||||||
| Intangible assets, net | 82,393 | 143,632 | ||||||||
| Other assets | 1,975 | 1,733 | ||||||||
| Total assets | $ | 238,030 | $ | 787,111 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 12,829 | $ | 18,689 | ||||||
| Deferred revenue | 4,395 | 9,093 | ||||||||
| Accrued compensation and benefits | 7,806 | 14,784 | ||||||||
| Restructuring | 14,127 | 18,975 | ||||||||
| Other current liabilities | 4,068 | 3,881 | ||||||||
| Total current liabilities | 43,225 | 65,422 | ||||||||
| Other liabilities | 1,366 | 1,366 | ||||||||
| Total liabilities | 44,591 | 66,788 | ||||||||
| Shareholders’ equity | 193,439 | 720,323 | ||||||||
| Total liabilities and shareholders’ equity | $ | 238,030 | $ | 787,111 | ||||||
MINDSPEED TECHNOLOGIES, INC.
Selected Corporate Data
(unaudited, in thousands)
| Three months ended | |||||||||||||||||||||
| June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||||
| 2003 | 2003 | 2002 | 2002 | 2002 | |||||||||||||||||
| Gross margin % | 68 | % | 69 | % | 70 | % | 69 | % | 68 | % | |||||||||||
| Depreciation (f) | $ | 3,455 | $ | 3,856 | $ | 4,140 | $ | 4,861 | $ | 5,461 | |||||||||||
| Capital expenditures | 1,049 | 774 | 1,598 | 983 | 3,687 | ||||||||||||||||
| Revenues by region: | |||||||||||||||||||||
| Americas | $ | 10,305 | $ | 9,168 | $ | 12,306 | $ | 15,839 | $ | 12,215 | |||||||||||
| Europe | 2,234 | 3,592 | 2,875 | 3,532 | 3,943 | ||||||||||||||||
| Asia-Pacific | 7,614 | 5,551 | 5,074 | 5,511 | 5,800 | ||||||||||||||||
| $ | 20,153 | $ | 18,311 | $ | 20,255 | $ | 24,882 | $ | 21,958 | ||||||||||||
| Nine months ended | |||||||||
| June 30, | |||||||||
| 2003 | 2002 | ||||||||
| Gross margin % | 69 | % | 61 | % | |||||
| Depreciation (f) | $ | 11,451 | $ | 17,042 | |||||
| Capital expenditures | 3,421 | 7,188 | |||||||
| Revenues by region: | |||||||||
| Americas | $ | 31,779 | $ | 30,793 | |||||
| Europe | 8,701 | 11,065 | |||||||
| Asia-Pacific | 18,239 | 13,296 | |||||||
| $ | 58,719 | $ | 55,154 | ||||||
| (f) | Does not include amortization of goodwill and intangible assets. |