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 DELIVERS 15 PERCENT SEQUENTIAL REVENUE
GROWTH IN FISCAL 2003 FOURTH QUARTER
Company Exceeds Expectations, Significantly Improving Operating
Performance and Reducing Cash Consumption by 34 Percent Sequentially
NEWPORT BEACH, Calif., October 29, 2003– Mindspeed Technologies, Inc. (AMEX: MND), a leading supplier of semiconductor solutions for network infrastructure applications, today announced revenues of $23.2 million for the fourth quarter of fiscal 2003, which ended September 30, 2003. Revenues increased 15 percent from third quarter fiscal 2003 revenues of $20.2 million, at the high end of the company’s expectations set at the beginning of the quarter.
“We are very pleased with our performance in our first quarter as a public company,” said Raouf Halim, Mindspeed’s chief executive officer. “In addition to solid execution on our revenue growth strategy, we exceeded our expectations by significantly reducing our operating loss and cash consumption. Every one of our four key product families grew sequentially, namely high-performance analog, multi-service access voice processing, T/E carrier transmission, and ATM/MPLS network processor solutions.”
More than 75 percent of the company’s sequential revenue growth during the quarter came from new products launched in fiscal year 2001 and thereafter, with particularly strong demand for voice-over-IP, fiber-to-the-home, and DS3/E3 carrier solutions.
During the quarter, the company’s revenues from the Asia-Pacific region grew 31 percent sequentially. Revenues from the Asia-Pacific and Americas regions each contributed 43 percent of total fourth quarter revenues, with Europe contributing 14 percent of the total.
Mindspeed’s pro forma operating loss for the fourth quarter of fiscal 2003 was $18.2 million, an improvement of 27 percent over the pro forma operating loss of $25.0 million in the prior quarter. Presented on a GAAP basis, Mindspeed’s operating loss for the fourth quarter was $32.4 million, as compared to $43.3 million last quarter, an improvement of 25 percent.
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| Mindspeed Reports Fiscal 2003 Fourth Quarter Results | 2 |
Mindspeed’s pro forma net loss for the fourth quarter was $17.9 million, or $0.20 per share, based on approximately 91.6 million shares outstanding, compared to the pro forma net loss of $24.5 million, or $0.27 per share, in the prior quarter. Presented on a GAAP basis, the net loss for the fourth quarter was $32.2 million, or $0.35 per share, compared to $42.9 million, or $0.48 per share last quarter.
Mindspeed’s total cash consumption (the net decrease in cash and cash equivalents) for the fourth quarter was $21.3 million, a 34 percent reduction from the $32.4 million cash consumption in the third quarter. The third quarter amount excludes cash received from Conexant Systems, Inc. during that period, including cash received at the time of separation. Cash consumption for the latest quarter includes the benefit of net cash provided by financing activities of $3.7 million, consisting principally of proceeds from the exercise of employee stock options.
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.
First Quarter Fiscal 2004 Outlook
“The revenue growth drivers for Mindspeed going forward are expected to be our voice-over-IP solutions and high-performance analog products addressing applications such as fiber-to-the-home and storage-area networking,” said Halim. “These product cycles are just starting, and will be complemented by the ongoing recovery of our T/E carrier and ATM product franchises as we continue to capture share in high-growth metro/access markets, particularly for DS3/E3 carrier applications.”
Mindspeed expects fiscal 2004 first-quarter revenues to be up 10-15 percent sequentially with overall gross margin at roughly 68 percent, and to further lower total quarterly operating expenses by roughly $2 million. As a result, the company expects to improve its pro forma operating loss by 15-20 percent, and expects to further reduce its cash consumption by at least 25 percent.
“We believe that the telecom carrier markets are in the early stages of a sustainable recovery worldwide,” Halim added. “Our customers are clearly more optimistic than they have been at any
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| Mindspeed Reports Fiscal 2003 Fourth Quarter Results | 3 |
time in the past two years with a large number of significant new platform development programs underway in which Mindspeed products have been designed.”
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 four key product families include high-performance analog transmission and switching solutions, multiservice access products designed to support voice and data services across wireline and wireless networks, T/E carrier physical-layer and link-layer devices, and ATM/MPLS network processors.
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 Mindspeed, including with respect to our future results, which include certain projections and business trends and are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Actual results, and actual events that occur, 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.
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| Mindspeed Reports Fiscal 2003 Fourth Quarter Results | 4 |
MINDSPEED TECHNOLOGIES, INC.
Pro Forma Consolidated Condensed Statements of Operations
(unaudited, in thousands, except per share amounts)
| Three months ended | Year ended | |||||||||||||||||||||||||||||||||
| September 30, | ||||||||||||||||||||||||||||||||||
| Sept. 30, | June 30, | March 31, | Sept. 30, | |||||||||||||||||||||||||||||||
| 2003 | 2003 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||||||||||
| Net revenues | $ | 23,187 | $ | 20,153 | $ | 18,311 | $ | 24,882 | $ | 81,906 | $ | 80,036 | ||||||||||||||||||||||
| Cost of goods sold (a) | 6,877 | 6,454 | 5,659 | 7,679 | 25,127 | 29,410 | ||||||||||||||||||||||||||||
| Gross margin | 16,310 | 13,699 | 12,652 | 17,203 | 56,779 | 50,626 | ||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||
| Research and development | 22,696 | 26,251 | 26,457 | 37,175 | 106,477 | 165,842 | ||||||||||||||||||||||||||||
| Selling, general and administrative | 11,784 | 12,418 | 12,853 | 14,086 | 49,140 | 68,906 | ||||||||||||||||||||||||||||
| Total operating expenses | 34,480 | 38,669 | 39,310 | 51,261 | 155,617 | 234,748 | ||||||||||||||||||||||||||||
| Pro forma operating loss | (18,170 | ) | (24,970 | ) | (26,658 | ) | (34,058 | ) | (98,838 | ) | (184,122 | ) | ||||||||||||||||||||||
| Other income (expense), net | 577 | 658 | (122 | ) | 227 | 1,078 | (298 | ) | ||||||||||||||||||||||||||
| Pro forma loss before income taxes | (17,593 | ) | (24,312 | ) | (26,780 | ) | (33,831 | ) | (97,760 | ) | (184,420 | ) | ||||||||||||||||||||||
| Provision for income taxes | 318 | 202 | 140 | 156 | 780 | 699 | ||||||||||||||||||||||||||||
| Pro forma net loss | $ | (17,911 | ) | $ | (24,514 | ) | $ | (26,920 | ) | $ | (33,987 | ) | $ | (98,540 | ) | $ | (185,119 | ) | ||||||||||||||||
| Pro forma net loss per share, basic and diluted | $ | (0.20 | ) | $ | (0.27 | ) | $ | (0.30 | ) | $ | (0.38 | ) | $ | (1.10 | ) | $ | (2.14 | ) | ||||||||||||||||
| Number of shares used in per share computation | 91,576 | 89,496 | 88,848 | 88,362 | 89,623 | 86,333 | ||||||||||||||||||||||||||||
Pro forma operating loss, 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 $1.0 million (September 2003), $0.5 million (June 2003), $1.1 million (March 2003) and $1.7 million (September 2002). For the years ended September 30, 2003 and 2002, the favorable effect of such sales was $4.1 million and $4.6 million, respectively. |
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| Mindspeed Reports Fiscal 2003 Fourth Quarter Results | 5 |
MINDSPEED TECHNOLOGIES, INC.
Reconciliation of Pro Forma Net Loss to Reported Results
(unaudited, in thousands, except per share amounts)
| Three months ended | Year ended | |||||||||||||||||||||||||
| September 30, | ||||||||||||||||||||||||||
| Sept. 30, | June 30, | March 31, | Sept. 30, | |||||||||||||||||||||||
| 2003 | 2003 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||||
| Pro forma net loss | $ | (17,911 | ) | $ | (24,514 | ) | $ | (26,920 | ) | $ | (33,987 | ) | $ | (98,540 | ) | $ | (185,119 | ) | ||||||||
| Amortization of intangible assets and special items: | ||||||||||||||||||||||||||
| Amortization of intangible assets | 12,352 | 12,349 | 12,322 | 71,765 | 51,223 | 312,388 | ||||||||||||||||||||
| Special charges (b) | 1,913 | 6,019 | 16,558 | 43,267 | 28,321 | 168,866 | ||||||||||||||||||||
| Stock compensation | — | — | (945 | ) | 418 | (823 | ) | 1,900 | ||||||||||||||||||
| Loss before cumulative effect of accounting change | $ | (32,176 | ) | $ | (42,882 | ) | $ | (54,855 | ) | $ | (149,437 | ) | $ | (177,261 | ) | $ | (668,273 | ) | ||||||||
| Loss per share, basic and diluted: | ||||||||||||||||||||||||||
| Pro forma net loss | $ | (0.20 | ) | $ | (0.27 | ) | $ | (0.30 | ) | $ | (0.38 | ) | $ | (1.10 | ) | $ | (2.14 | ) | ||||||||
| Amortization of intangible assets and special items | (0.15 | ) | (0.21 | ) | (0.32 | ) | (1.31 | ) | (0.88 | ) | (5.60 | ) | ||||||||||||||
| Loss before cumulative effect of accounting change | $ | (0.35 | ) | $ | (0.48 | ) | $ | (0.62 | ) | $ | (1.69 | ) | $ | (1.98 | ) | $ | (7.74 | ) | ||||||||
| (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. |
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| Mindspeed Reports Fiscal 2003 Fourth Quarter Results | 6 |
MINDSPEED TECHNOLOGIES, INC.
Consolidated Condensed Statements of Operations
(unaudited, in thousands, except per share amounts)
| Three months ended | |||||||||||||||||||||||||||
| Year ended | |||||||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||||||
| Sept. 30, | June 30, | March 31, | Sept. 30, | ||||||||||||||||||||||||
| 2003 | 2003 | 2003 | 2002 | 2003 | 2002 | ||||||||||||||||||||||
| Net revenues | $ | 23,187 | $ | 20,153 | $ | 18,311 | $ | 24,882 | $ | 81,906 | $ | 80,036 | |||||||||||||||
| Cost of goods sold (c) | 6,877 | 6,454 | 5,659 | 7,679 | 25,127 | 29,410 | |||||||||||||||||||||
| Gross margin | 16,310 | 13,699 | 12,652 | 17,203 | 56,779 | 50,626 | |||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||
| Research and development | 22,696 | 26,251 | 26,190 | 37,379 | 106,289 | 167,148 | |||||||||||||||||||||
| Selling, general and administrative | 11,784 | 12,418 | 13,326 | 14,300 | 49,656 | 69,500 | |||||||||||||||||||||
| Amortization of intangible assets | 12,352 | 12,349 | 12,322 | 71,765 | 51,223 | 312,388 | |||||||||||||||||||||
| Special charges (d) | 1,913 | 6,019 | 15,407 | 43,267 | 27,170 | 168,866 | |||||||||||||||||||||
| Total operating expenses | 48,745 | 57,037 | 67,245 | 166,711 | 234,338 | 717,902 | |||||||||||||||||||||
| Operating loss | (32,435 | ) | (43,338 | ) | (54,593 | ) | (149,508 | ) | (177,559 | ) | (667,276 | ) | |||||||||||||||
| Other income (expense), net | 577 | 658 | (122 | ) | 227 | 1,078 | (298 | ) | |||||||||||||||||||
| Loss before income taxes | (31,858 | ) | (42,680 | ) | (54,715 | ) | (149,281 | ) | (176,481 | ) | (667,574 | ) | |||||||||||||||
| Provision for income taxes | 318 | 202 | 140 | 156 | 780 | 699 | |||||||||||||||||||||
| Loss before cumulative effect of accounting change | (32,176 | ) | (42,882 | ) | (54,855 | ) | (149,437 | ) | (177,261 | ) | (668,273 | ) | |||||||||||||||
| Cumulative effect of change in accounting for goodwill (e) | — | — | — | — | (573,184 | ) | — | ||||||||||||||||||||
| Net loss | $ | (32,176 | ) | $ | (42,882 | ) | $ | (54,855 | ) | $ | (149,437 | ) | $ | (750,445 | ) | $ | (668,273 | ) | |||||||||
| Loss per share, basic and diluted: | |||||||||||||||||||||||||||
| Loss before cumulative effect of accounting change | $ | (0.35 | ) | $ | (0.48 | ) | $ | (0.62 | ) | $ | (1.69 | ) | $ | (1.98 | ) | $ | (7.74 | ) | |||||||||
| Cumulative effect of change in accounting for goodwill | — | — | — | — | (6.39 | ) | — | ||||||||||||||||||||
| Net loss | $ | (0.35 | ) | $ | (0.48 | ) | $ | (0.62 | ) | $ | (1.69 | ) | $ | (8.37 | ) | $ | (7.74 | ) | |||||||||
| Number of shares used in per share computation | 91,576 | 89,496 | 88,848 | 88,362 | 89,623 | 86,333 | |||||||||||||||||||||
| (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 $1.0 million (September 2003), $0.5 million (June 2003), $1.1 million (March 2003) and $1.7 million (September 2002). For the years ended September 30, 2003 and 2002, the favorable effect of such sales was $4.1 million and $4.6 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. |
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| Mindspeed Reports Fiscal 2003 Fourth Quarter Results | 7 |
MINDSPEED TECHNOLOGIES, INC.
Consolidated Condensed Balance Sheets
(unaudited, in thousands)
| September 30, | ||||||||||
| 2003 | 2002 | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 80,121 | $ | 7,269 | ||||||
| Receivables, net | 11,652 | 12,568 | ||||||||
| Inventories | 4,035 | 4,842 | ||||||||
| Other current assets | 7,926 | 5,313 | ||||||||
| Total current assets | 103,734 | 29,992 | ||||||||
| Property, plant and equipment, net | 26,612 | 42,854 | ||||||||
| Goodwill | — | 568,900 | ||||||||
| Intangible assets, net | 69,867 | 143,632 | ||||||||
| Other assets | 3,676 | 1,733 | ||||||||
| Total assets | $ | 203,889 | $ | 787,111 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 8,110 | $ | 18,689 | ||||||
| Deferred revenue | 3,173 | 9,093 | ||||||||
| Accrued compensation and benefits | 8,424 | 14,784 | ||||||||
| Restructuring | 7,273 | 18,975 | ||||||||
| Other current liabilities | 4,971 | 3,881 | ||||||||
| Total current liabilities | 31,951 | 65,422 | ||||||||
| Other liabilities | 4,804 | 1,366 | ||||||||
| Total liabilities | 36,755 | 66,788 | ||||||||
| Shareholders’ equity | 167,134 | 720,323 | ||||||||
| Total liabilities and shareholders’ equity | $ | 203,889 | $ | 787,111 | ||||||
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| Mindspeed Reports Fiscal 2003 Fourth Quarter Results | 8 |
MINDSPEED TECHNOLOGIES, INC.
Consolidated Condensed Statements of Cash Flows
(unaudited, in thousands)
| Year ended September 30, | ||||||||||
| 2003 | 2002 | |||||||||
Cash Flows From Operating Activities | ||||||||||
| Net loss | $ | (750,445 | ) | $ | (668,273 | ) | ||||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||||
| Cumulative effect of change in accounting for goodwill | 573,184 | — | ||||||||
| Depreciation | 14,629 | 21,903 | ||||||||
| Amortization of intangible assets | 51,223 | 312,388 | ||||||||
| Asset impairments | 23,397 | 143,429 | ||||||||
| Provision for losses on accounts receivable | (593 | ) | 1,936 | |||||||
| Inventory provisions | 1,239 | 4,518 | ||||||||
| Stock compensation | 722 | 3,527 | ||||||||
| Other noncash charges, net | (8,526 | ) | 1,078 | |||||||
| Changes in assets and liabilities: | ||||||||||
| Receivables | 1,460 | 3,049 | ||||||||
| Inventories | (432 | ) | (1,723 | ) | ||||||
| Accounts payable | (10,403 | ) | (915 | ) | ||||||
| Deferred revenue | (5,553 | ) | (15,397 | ) | ||||||
| Accrued expenses and other current liabilities | (15,394 | ) | (1,740 | ) | ||||||
| Other | (88 | ) | (9,090 | ) | ||||||
| Net cash used in operating activities | (125,580 | ) | (205,310 | ) | ||||||
Cash Flows From Investing Activities | ||||||||||
| Sales of assets | 9,456 | 810 | ||||||||
| Capital expenditures | (3,449 | ) | (8,171 | ) | ||||||
| Net cash provided by (used in) investing activities | 6,007 | (7,361 | ) | |||||||
Cash Flows From Financing Activities | ||||||||||
| Proceeds from exercise of options and warrants | 6,085 | — | ||||||||
| Net transfers and advances from Conexant | 186,584 | 210,688 | ||||||||
| Deferred financing costs paid | (244 | ) | — | |||||||
| Net cash provided by financing activities | 192,425 | 210,688 | ||||||||
| Net increase (decrease) in cash and cash equivalents | 72,852 | (1,983 | ) | |||||||
| Cash and cash equivalents at beginning of period | 7,269 | 9,252 | ||||||||
| Cash and cash equivalents at end of period | $ | 80,121 | $ | 7,269 | ||||||
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| Mindspeed Reports Fiscal 2003 Fourth Quarter Results | 9 |
MINDSPEED TECHNOLOGIES, INC.
Selected Corporate Data
(unaudited, in thousands)
| Three months ended | |||||||||||||||||||||
| Sept. 30, | June 30, | March 31, | Dec. 31, | Sept. 30, | |||||||||||||||||
| 2003 | 2003 | 2003 | 2002 | 2002 | |||||||||||||||||
| Gross margin % | 70 | % | 68 | % | 69 | % | 70 | % | 69 | % | |||||||||||
| Depreciation (f) | $ | 3,178 | $ | 3,455 | $ | 3,856 | $ | 4,140 | $ | 4,861 | |||||||||||
| Capital expenditures | 28 | 1,049 | 774 | 1,598 | 983 | ||||||||||||||||
| Revenues by region: | |||||||||||||||||||||
| Americas | $ | 9,983 | $ | 10,305 | $ | 9,168 | $ | 12,306 | $ | 15,839 | |||||||||||
| Europe | 3,205 | 2,234 | 3,592 | 2,875 | 3,532 | ||||||||||||||||
| Asia-Pacific | 9,999 | 7,614 | 5,551 | 5,074 | 5,511 | ||||||||||||||||
| $ | 23,187 | $ | 20,153 | $ | 18,311 | $ | 20,255 | $ | 24,882 | ||||||||||||
| Year ended | ||||||||||||
| September 30, | ||||||||||||
| 2003 | 2002 | |||||||||||
| Gross margin % | 69 | % | 63 | % | ||||||||
| Depreciation (f) | $ | 14,629 | $ | 21,903 | ||||||||
| Capital expenditures | 3,449 | 8,171 | ||||||||||
| Revenues by region: | ||||||||||||
| Americas | $ | 41,762 | $ | 46,632 | ||||||||
| Europe | 11,906 | 14,597 | ||||||||||
| Asia-Pacific | 28,238 | 18,807 | ||||||||||
| $ | 81,906 | $ | 80,036 | |||||||||
| (f) | Does not include amortization of goodwill and intangible assets. |
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