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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended December 28, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 000-24923
 CONEXANT SYSTEMS, INC.
  Delaware
(State of incorporation)
    
    25-1799439
(I.R.S. Employer Identification No.)
 4000 MacArthur Boulevard
Newport Beach, California 92660-3095
 (949) 483-4600
 þ o
 þ o o
 o þ




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##### Table of Contents



FORWARD-LOOKING STATEMENTS
  
    
    pricing pressures and other competitive factors;
    
    our ability to anticipate trends and successfully develop products for which there will
be market demand;
    
    the market acceptance and timing of our new product introductions, demand for existing
products and product quality;
    
    the cyclical nature of the semiconductor industry and the markets addressed by our
products and our customers products;
    
    continuing volatility in the technology sector and the semiconductor industry;
    
    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;
    
    our ability to develop and implement new technologies and to obtain protection for the
related intellectual property;
    
    the risk that the value of our common stock may be adversely affected by market
volatility;
    
    the substantial losses we have incurred recently;
    
    changes in product mix and product obsolescence;
    
    general economic and political conditions and conditions in the markets we address;
    
    the ability of our customers to manage inventory;
    
    the availability of manufacturing capacity;
    
    the risk that capital needed for our business and to repay our indebtedness will not be
available when needed;
    
    the ability of management to structure and execute on new restructuring plans;
    
    possible disruptions in commerce related to terrorist activity or armed conflict,




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##### 



CONEXANT SYSTEMS, INC.
 INDEX
 PAGEPART I. FINANCIAL INFORMATIONItem 1.
    
    Condensed Consolidated Financial Statements (unaudited):Condensed Consolidated Balance Sheets  December 28,
2007 and September 28, 2007
    
    
    3Condensed Consolidated Statements of Operations  Fiscal
Quarters Ended December 28, 2007 and December 29, 2006
    
    
    4Condensed Consolidated Statements of Cash Flows  Fiscal
Quarters Ended December 28, 2007 and December 29, 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    28Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4.
    
    Controls and Procedures
    
    
    37PART II. OTHER INFORMATION
    
    
    38Item 1.
    
    Legal Proceedings
    
    
    38Item 6.
    
    Exhibits
    
    
    39SIGNATURE
    
    
    40EXHIBIT 10.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  2




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PART I. FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except par value)
 December 28,
    
    
    September 28,2007
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    232,141
    
    
    $
    235,605Restricted cash
    
    
    8,800
    
    
    
    8,800Receivables, net of allowances of $1,561 and $1,659
    
    
    71,727
    
    
    
    80,906Inventories
    
    
    60,899
    
    
    
    63,174Other current assets
    
    
    23,917
    
    
    
    20,361Total current assets
    
    
    397,484
    
    
    
    408,846Property, plant and equipment, net
    
    
    58,222
    
    
    
    67,967Goodwill
    
    
    405,737
    
    
    
    406,323Intangible assets, net
    
    
    21,531
    
    
    
    26,067Other assets
    
    
    66,634
    
    
    
    76,766Total assets
    
    $
    949,608
    
    
    $
    985,969LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    54,900
    
    
    $
    58,000Short-term debt
    
    
    70,973
    
    
    
    80,000Accounts payable
    
    
    75,613
    
    
    
    80,667Accrued compensation and benefits
    
    
    25,716
    
    
    
    26,154Other current liabilities
    
    
    49,886
    
    
    
    70,631Total current liabilities
    
    
    277,088
    
    
    
    315,452Long-term debt
    
    
    470,100
    
    
    
    467,000Other liabilities
    
    
    62,391
    
    
    
    57,002Total liabilities
    
    
    809,579
    
    
    
    839,454Commitments
and contingencies (Note 4)Shareholders equity:Preferred and junior preferred stock
    
    
    
    
    
    
    Common stock, $0.01 par value: 1,000,000 shares authorized; 492,367
and 492,362 shares issued; and 492,367 and 492,362 shares
outstanding
    
    
    4,924
    
    
    
    4,924Additional paid-in capital
    
    
    4,726,044
    
    
    
    4,721,298Accumulated deficit
    
    
    (4,588,261
    )
    
    
    (4,578,219
    )Accumulated other comprehensive loss
    
    
    (2,574
    )
    
    
    (1,385
    )Shareholder notes receivable
    
    
    (104
    )
    
    
    (103
    )Total shareholders equity
    
    
    140,029
    
    
    
    146,515Total liabilities and shareholders equity
    
    $
    949,608
    
    
    $
    985,969
  3




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)
 Fiscal Quarter EndedDecember 28,
    
    
    December 29,2007
    
    
    2006Net revenues
    
    $
    196,958
    
    
    $
    245,534Cost of goods sold (1)
    
    
    97,687
    
    
    
    136,045Gross margin
    
    
    99,271
    
    
    
    109,489Operating expenses:Research and development (1)
    
    
    60,390
    
    
    
    71,450Selling, general and administrative (1)
    
    
    23,101
    
    
    
    27,476Amortization of intangible assets
    
    
    4,781
    
    
    
    6,238Asset impairments
    
    
    130
    
    
    
    Special charges
    
    
    5,784
    
    
    
    2,898Total operating expenses
    
    
    94,186
    
    
    
    108,062Operating income
    
    
    5,085
    
    
    
    1,427Interest expense
    
    
    (11,563
    )
    
    
    (13,036
    )Other (expense) income, net
    
    
    (5,345
    )
    
    
    8,360(Loss) before income taxes and gain on equity method investments
    
    
    (11,823
    )
    
    
    (3,249
    )Provision for income taxes
    
    
    1,168
    
    
    
    471(Loss) before gain on equity method investments
    
    
    (12,991
    )
    
    
    (3,720
    )Gain on equity method investments
    
    
    3,773
    
    
    
    4,696Net (loss) income
    
    $
    (9,218
    )
    
    $
    976Net (loss) per share  basic
    
    $
    (0.02
    )
    
    $
    Net (loss) per share  diluted
    
    $
    (0.02
    )
    
    $
    Shares used in computing basic net (loss) per share
    
    
    492,363
    
    
    
    485,957Shares used in computing diluted net (loss) per share
    
    
    492,363
    
    
    
    492,583
 
 (1)
    
    These captions include non-cash employee stock-based
compensation expense as follows (see Note 5): Fiscal Quarter EndedDecember 28,
    
    December 29,2007
    
    2006Cost of goods sold
    
    $
    114
    
    
    $
    103Research and development
    
    
    2,160
    
    
    
    2,367Selling, general and administrative
    
    
    1,010
    
    
    
    1,867
  4




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
 Fiscal Quarter EndedDecember 28,
    
    
    December 29,2007
    
    
    2006Cash flows from operating activities:Net (loss) income
    
    $
    (9,218
    )
    
    $
    976Adjustments to reconcile net (loss) income to net cash provided
by operating activities, net of effects of acquisitions:Depreciation
    
    
    5,709
    
    
    
    5,846Amortization of intangible assets
    
    
    4,781
    
    
    
    6,238Asset impairments
    
    
    130
    
    
    
    Reversals of provision for bad debts, net
    
    
    (95
    )
    
    
    (237
    )Charges (reversals) for inventory provisions, net
    
    
    2,598
    
    
    
    (2,274
    )Deferred income taxes
    
    
    5,593
    
    
    
    2Stock-based compensation
    
    
    3,284
    
    
    
    4,337Decrease (increase) in fair value of derivative instruments
    
    
    8,160
    
    
    
    (3,042
    )(Gains) losses of equity method investments
    
    
    (542
    )
    
    
    5Losses (gains) on equity securities and other assets
    
    
    
    
    
    
    (4,853
    )Other items, net
    
    
    32
    
    
    
    (88
    )Changes in assets and liabilities:Receivables
    
    
    9,274
    
    
    
    (6,277
    )Inventories
    
    
    (323
    )
    
    
    16,441Accounts payable
    
    
    (5,054
    )
    
    
    (8,559
    )Accrued expenses and other current liabilities
    
    
    (18,970
    )
    
    
    2,191Other, net
    
    
    2,569
    
    
    
    (2,832
    )Net cash provided by operating activities
    
    
    7,928
    
    
    
    7,874Cash flows from investing activities:Purchases of marketable debt securities
    
    
    
    
    
    
    (12,094
    )Proceeds from sales and maturities of marketable debt securities
    
    
    
    
    
    
    28,688Purchases of equity securities
    
    
    (755
    )
    
    
    Proceeds from equity securities and other assets
    
    
    
    
    
    
    436Purchases of property, plant and equipment
    
    
    (1,614
    )
    
    
    (7,216
    )Payments for acquisitions
    
    
    
    
    
    
    (5,029
    )Net cash (used in) provided by investing activities
    
    
    (2,369
    )
    
    
    4,785Cash flows from financing activities:Proceeds from short-term debt
    
    
    18,664
    
    
    
    Repayments
of short-term debt, net of expenses of $1,074 and $845
    
    
    (27,691
    )
    
    
    (845
    )Proceeds from long-term debt, net of expenses of $7,779
    
    
    
    
    
    
    267,221Proceeds from issuance of common stock
    
    
    4
    
    
    
    2,243Repayment of shareholder notes receivable
    
    
    
    
    
    
    21Net cash (used in) provided by financing activities
    
    
    (9,023
    )
    
    
    268,640Net (decrease) increase in cash and cash equivalents
    
    
    (3,464
    )
    
    
    281,299Cash and cash equivalents at beginning of period
    
    
    235,605
    
    
    
    225,626Cash and cash equivalents at end of period
    
    $
    232,141
    
    
    $
    506,925
  5




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
 1. Description of Business
  2. Basis of Presentation and Significant Accounting Policies
 Interim Reporting 
  Fiscal Periods
 Revenue Recognition
 6




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
  Uncertain Tax Positions
 Liquidity
  Reclassifications
  Three MonthsEndedDecember 29, 2006Other income, net, before reclassification
    
    $
    13,056Gain on equity method investments
    
    
    (4,696
    )Other income, net, after reclassification
    
    $
    8,360
 Review of Accounting for Research and Development Costs 
 7




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
  Derivative Financial Instruments
    Supplemental
Cash Flow Information
 Net Loss Per Share
 8




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
  Fiscal Quarter EndedDecember 28,
    
    December 29,2007
    
    2006Stock options and warrants
    
    
    94,723
    
    
    
    70,2364.00% convertible subordinated notes due February 2007
    
    
    
    
    
    
    10,7584.00% convertible subordinated notes due March 2026
    
    
    50,813
    
    
    
    50,813145,536
    
    
    
    131,807
 Business Enterprise Segments
  
    
    the nature of products and services;
    
    the nature of the production processes;
    
    the type or class of customer for their products and services; and
    
    the methods used to distribute their products or provide their services.
  
    
    the sale of semiconductor products is the only material source of revenue for each of the
Companys four operating segments;
    
    the products sold by each of the Companys operating segments use the same standard
manufacturing process;
    
    the products marketed by each of the Companys operating segments are sold to similar
customers; and
    
    all of the Companys products are sold through its internal sales force and common
distributors.
  Recent Accounting Pronouncements
   9




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
   Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB 51
  3. Supplemental Financial Information
 Inventories
  December 28,
    
    
    September 28,2007
    
    
    2007Work-in-process
    
    $
    25,656
    
    
    $
    24,219Finished goods
    
    
    35,243
    
    
    
    38,955$
    60,899
    
    
    $
    63,174
  10




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Intangible Assets
  December 28, 2007
    
    
    September 28, 2007Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Book
    
    
    Carrying
    
    
    Accumulated
    
    
    BookAmount
    
    
    Amortization
    
    
    Value
    
    
    Amount
    
    
    Amortization
    
    
    ValueDeveloped technology
    
    $
    76,109
    
    
    $
    (58,908
    )
    
    $
    17,201
    
    
    $
    75,865
    
    
    $
    (54,605
    )
    
    $
    21,260Product licenses
    
    
    9,327
    
    
    
    (6,795
    )
    
    
    2,532
    
    
    
    9,327
    
    
    
    (6,547
    )
    
    
    2,780Other intangible assets
    
    
    6,015
    
    
    
    (4,217
    )
    
    
    1,798
    
    
    
    6,015
    
    
    
    (3,988
    )
    
    
    2,027$
    91,451
    
    
    $
    (69,920
    )
    
    $
    21,531
    
    
    $
    91,207
    
    
    $
    (65,140
    )
    
    $
    26,067
  Remainder of 2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    ThereafterAmortization expense
    
    $
    11,808
    
    
    $
    7,781
    
    
    $
    1,018
    
    
    $
    484
    
    
    $
    206
    
    
    $
    234
 Mindspeed Warrant
   Short-Term Debt
   11




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
   Long-Term Debt
  December 28,
    
    
    September 28,2007
    
    
    2007Floating rate senior secured notes due November 2010
    
    $
    275,000
    
    
    $
    275,0004.00% convertible subordinated notes due March 2026 with a conversion price of $4.92
    
    
    250,000
    
    
    
    250,000Total
    
    
    525,000
    
    
    
    525,000Less: current portion of long-term debt
    
    
    (54,900
    )
    
    
    (58,000
    )Long-term debt
    
    $
    470,100
    
    
    $
    467,000
 Floating rate senior secured notes due November 2010
  12




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
   4.00% convertible subordinated notes due March 2026
  4. Commitments and Contingencies
 Legal Matters
  IPO Litigation 
 13




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
  Class Action Suit  Graden v. Conexant,
et al.
  Guarantees and Indemnifications
   14




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Other
 Tax Matter
 Capital Investments
 5. Stock Option Plans
    Fiscal Quarter EndedDecember 28,2007
    
    December 29,2006Stock option plans:Expected dividend yield
    
    $
    
    
    
    $
    Expected stock price volatility
    
    
    66
    %
    
    
    71
    %Risk free interest rate
    
    
    4.0
    %
    
    
    4.6
    %Average expected life (in years)
    
    
    4.88
    
    
    
    5.25Stock purchase plan:Expected dividend yield
    
    $
    
    
    
    $
    Expected stock price volatility
    
    
    42
    %
    
    
    67
    %Risk free interest rate
    
    
    4.8
    %
    
    
    5.0
    %Average expected life (in years)
    
    
    0.5
    
    
    
    0.5
  15




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
  WeightedAverageShares
    
    
    Exercise PriceOutstanding, September 28, 2007
    
    
    100,812
    
    
    $
    2.39Granted
    
    
    1,115
    
    
    
    1.19Exercised
    
    
    (5
    )
    
    
    1.05Forfeited
    
    
    (11,170
    )
    
    
    2.25Outstanding, December 28, 2007
    
    
    90,752
    
    
    
    2.40Exercisable, December 28, 2007
    
    
    58,474
    
    
    
    2.73
  Directors Stock Plan
  Employee Stock Purchase Plan
   16




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
 2001 Performance Share Plan and 2004 New Hire Equity Incentive Plan
  Performance Plan
  WeightedAverage GrantShares
    
    
    Date Fair ValueOutstanding, September 28, 2007
    
    
    900
    
    
    $
    2.29Granted
    
    
    750
    
    
    
    1.24Forfeited
    
    
    (700
    )
    
    
    2.29Outstanding, December 28, 2007
    
    
    950
    
    
    
    1.46
 WeightedAverage GrantShares
    
    
    Date Fair ValueOutstanding, September 29, 2006
    
    
    275
    
    
    $
    2.90Granted
    
    
    900
    
    
    
    2.29Vested
    
    
    (275
    )
    
    
    2.90Outstanding, December 29, 2006
    
    
    900
    
    
    
    2.29
  2004 New Hire Plan
   17




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
   6. Comprehensive (Loss) Income
  Fiscal Quarter EndedDecember 28,
    
    
    December 29,2007
    
    
    2006Net (loss) income
    
    $
    (9,218
    )
    
    $
    976Other comprehensive (loss) income:Foreign currency translation adjustments
    
    
    299
    
    
    
    981Unrealized gains (losses) on marketable securities
    
    
    
    
    
    
    11,796Unrealized (losses) gains on foreign currency
forward hedge contracts
    
    
    (377
    )
    
    
    249Minimum pension liability adjustments
    
    
    (1,110
    )
    
    
    54Other comprehensive (loss) income
    
    
    (1,189
    )
    
    
    13,080Comprehensive (loss) income
    
    $
    (10,407
    )
    
    $
    14,056
  December 28,
    
    
    September 28,2007
    
    
    2007Foreign currency translation adjustments
    
    $
    2,292
    
    
    $
    1,994Unrealized gains on foreign currency forward hedge contracts
    
    
    3
    
    
    
    380Minimum pension liability adjustments
    
    
    (4,869
    )
    
    
    (3,759
    )Accumulated other comprehensive loss
    
    $
    (2,574
    )
    
    $
    (1,385
    )
 7. Special Charges
  18




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Restructuring Charges
   Fiscal 2008 Restructuring Actions
  Workforce
    
    
    FacilityReductions
    
    
    And Other
    
    
    TotalRestructuring balance, September 28, 2007
    
    $
    
    
    
    $
    
    
    
    $
    Charged to costs and expenses
    
    
    3,042
    
    
    
    1,145
    
    
    
    4,187Non-cash items
    
    
    
    
    
    
    
    
    
    
    Cash payments
    
    
    (1,756
    )
    
    
    (53
    )
    
    
    (1,809
    )Restructuring balance, December 28, 2007
    
    $
    1,286
    
    
    $
    1,092
    
    
    $
    2,378
 Fiscal 2007 Restructuring Actions
  Workforce
    
    
    FacilityReductions
    
    
    And Other
    
    
    TotalRestructuring balance, September 28, 2007
    
    $
    3,636
    
    
    $
    6,640
    
    
    $
    10,276Charged to costs and expenses
    
    
    373
    
    
    
    2,086
    
    
    
    2,459Non-cash items
    
    
    
    
    
    
    (70
    )
    
    
    (70
    )Cash payments
    
    
    (1,071
    )
    
    
    (632
    )
    
    
    (1,703
    )Restructuring balance, December 28, 2007
    
    $
    2,938
    
    
    $
    8,024
    
    
    $
    10,962
 19




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Fiscal 2006 and 2005 Restructuring Actions
  Workforce
    
    
    FacilityReductions
    
    
    And Other
    
    
    TotalRestructuring balance, September 28, 2007
    
    $
    131
    
    
    $
    12,516
    
    
    $
    12,647Charged to costs and expenses
    
    
    
    
    
    
    244
    
    
    
    244Cash payments
    
    
    (1
    )
    
    
    (588
    )
    
    
    (589
    )Non-cash items
    
    
    
    
    
    
    82
    
    
    
    82Restructuring balance, December 28, 2007
    
    $
    130
    
    
    $
    12,254
    
    
    $
    12,385
 8.
Other (expense) income, net
  Fiscal Quarter EndedDecember 28,
    
    
    December 29,2007
    
    
    2006Investment and interest income
    
    $
    2,771
    
    
    $
    5,389Increase (decrease) in the fair value of derivative instruments
    
    
    (8,364
    )
    
    
    3,042Other
    
    
    248
    
    
    
    (71
    )Other
(expense) income, net
    
    $
    (5,345
    )
    
    $
    8,360
   9. Income Taxes
   20




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
      10. Related Party Transactions
 Mindspeed Technologies, Inc.
  Lease Agreement
 21




---



##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
 11. Geographic Information
  Fiscal Quarter EndedDecember 28,
    
    
    December 29,2007
    
    
    2006United States
    
    $
    7,905
    
    
    $
    26,902Other Americas
    
    
    6,842
    
    
    
    10,872Total Americas
    
    
    14,747
    
    
    
    37,774China
    
    
    117,305
    
    
    
    129,493South Korea
    
    
    13,073
    
    
    
    21,395Taiwan
    
    
    10,537
    
    
    
    11,645Other Asia-Pacific
    
    
    31,276
    
    
    
    32,224Total Asia-Pacific
    
    
    172, 191
    
    
    
    194,757Europe, Middle East and Africa
    
    
    10,020
    
    
    
    13,003$
    196,958
    
    
    $
    245,534
   December 28,
    
    
    September 28,2007
    
    
    2007United States
    
    $
    88,837
    
    
    $
    84,267India
    
    
    16,225
    
    
    
    17,377Other Asia-Pacific
    
    
    10,968
    
    
    
    10,934Europe, Middle East and Africa
    
    
    1,669
    
    
    
    1,831$
    117,699
    
    
    $
    114,409
 12. Supplemental Guarantor Financial Information
  22




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
   December 28, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    203,522
    
    
    $
    
    
    
    $
    28,619
    
    
    $
    
    
    
    $
    232,141Restricted cash
    
    
    
    
    
    
    
    
    
    
    8,800
    
    
    
    
    
    
    
    8,800Receivables, net
    
    
    (25,327
    )
    
    
    
    
    
    
    97,054
    
    
    
    
    
    
    
    71,727Inventories
    
    
    60,899
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,899Other current assets
    
    
    10,650
    
    
    
    3
    
    
    
    13,264
    
    
    
    
    
    
    
    23,917Total current assets
    
    
    249,744
    
    
    
    3
    
    
    
    147,737
    
    
    
    
    
    
    
    397,484Property and equipment, net
    
    
    30,971
    
    
    
    
    
    
    
    27,251
    
    
    
    
    
    
    
    58,222Goodwill
    
    
    68,748
    
    
    
    30,835
    
    
    
    306,154
    
    
    
    
    
    
    
    405,737Intangible assets, net
    
    
    (4,939
    )
    
    
    1,815
    
    
    
    24,655
    
    
    
    
    
    
    
    21,531Other assets
    
    
    64,217
    
    
    
    
    
    
    
    2,417
    
    
    
    
    
    
    
    66,634Investments in subsidiaries
    
    
    521,123
    
    
    
    13,206
    
    
    
    
    
    
    
    (534,329
    )
    
    
    Total assets
    
    $
    929,864
    
    
    $
    45,859
    
    
    $
    508,214
    
    
    $
    (534,329
    )
    
    $
    949,608Current liabilities:Current portion of long-term debt
    
    $
    54,900
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    54,900Short-term debt
    
    
    
    
    
    
    
    
    
    
    70,973
    
    
    
    
    
    
    
    70,973Accounts payable
    
    
    71,992
    
    
    
    
    
    
    
    3,621
    
    
    
    
    
    
    
    75,613Accrued compensation and benefits
    
    
    18,266
    
    
    
    
    
    
    
    7,450
    
    
    
    
    
    
    
    25,716Intercompany payable (receivable)
    
    
    91,122
    
    
    
    (169,158
    )
    
    
    78,036
    
    
    
    
    
    
    
    Other current liabilities
    
    
    41,092
    
    
    
    932
    
    
    
    7,862
    
    
    
    
    
    
    
    49,886Total current liabilities
    
    
    277,372
    
    
    
    (168,226
    )
    
    
    167,942
    
    
    
    
    
    
    
    277,088Long-term debt
    
    
    470,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    470,100Other liabilities
    
    
    59,375
    
    
    
    
    
    
    
    3,016
    
    
    
    
    
    
    
    62,391Total liabilities
    
    
    806,847
    
    
    
    (168,226
    )
    
    
    170,958
    
    
    
    
    
    
    
    809,579Shareholders equity
    
    
    123,017
    
    
    
    214,085
    
    
    
    337,256
    
    
    
    (534,329
    )
    
    
    140,029Total liabilities and equity
    
    $
    929,864
    
    
    $
    45,859
    
    
    $
    508,214
    
    
    $
    (534,329
    )
    
    $
    949,608
 23




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
 September 28, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    199,263
    
    
    $
    
    
    
    $
    36,342
    
    
    $
    
    
    
    $
    235,605Restricted cash
    
    
    
    
    
    
    
    
    
    
    8,800
    
    
    
    
    
    
    
    8,800Receivables
    
    
    (10,071
    )
    
    
    
    
    
    
    90,977
    
    
    
    
    
    
    
    80,906Inventories
    
    
    63,174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,174Other current assets
    
    
    13,028
    
    
    
    2
    
    
    
    7,331
    
    
    
    
    
    
    
    20,361Total current assets
    
    
    265,934
    
    
    
    2
    
    
    
    143,450
    
    
    
    
    
    
    
    408,846Property and equipment, net
    
    
    39,543
    
    
    
    
    
    
    
    28,424
    
    
    
    
    
    
    
    67,967Goodwill
    
    
    68,834
    
    
    
    307,051
    
    
    
    30,438
    
    
    
    
    
    
    
    406,323Intangible assets, net
    
    
    5,764
    
    
    
    18,244
    
    
    
    2,059
    
    
    
    
    
    
    
    26,067Other assets
    
    
    73,635
    
    
    
    
    
    
    
    3,131
    
    
    
    
    
    
    
    76,766Investments in subsidiaries
    
    
    513,340
    
    
    
    11,563
    
    
    
    
    
    
    
    (524,903
    )
    
    
    Total assets
    
    $
    966,510
    
    
    $
    336,860
    
    
    $
    207,502
    
    
    $
    (524,903
    )
    
    $
    985,969Current liabilities:Current portion of long-term debt
    
    $
    58,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    58,000Short-term debt
    
    
    
    
    
    
    
    
    
    
    80,000
    
    
    
    
    
    
    
    80,000Accounts payable
    
    
    77,581
    
    
    
    
    
    
    
    3,086
    
    
    
    
    
    
    
    80,667Accrued compensation and benefits
    
    
    18,478
    
    
    
    
    
    
    
    7,676
    
    
    
    
    
    
    
    26,154Intercompany payable (receivable)
    
    
    96,258
    
    
    
    (169,158
    )
    
    
    72,900
    
    
    
    
    
    
    
    Other current liabilities
    
    
    66,035
    
    
    
    931
    
    
    
    3,665
    
    
    
    
    
    
    
    70,631Total current liabilities
    
    
    316,352
    
    
    
    (168,227
    )
    
    
    167,327
    
    
    
    
    
    
    
    315,452Long-term debt
    
    
    467,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    467,000Other liabilities
    
    
    53,410
    
    
    
    
    
    
    
    3,592
    
    
    
    
    
    
    
    57,002Total liabilities
    
    
    836,762
    
    
    
    (168,227
    )
    
    
    170,919
    
    
    
    
    
    
    
    839,454Shareholders equity
    
    
    129,748
    
    
    
    505,087
    
    
    
    36,583
    
    
    
    (524,903
    )
    
    
    146,515Total liabilities and equity
    
    $
    966,510
    
    
    $
    336,860
    
    
    $
    207,502
    
    
    $
    (524,903
    )
    
    $
    985,969
 24




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
  Fiscal Quarter Ended December 28, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenues
    
    $
    170,994
    
    
    $
    11,196
    
    
    $
    25,964
    
    
    $
    (11,196
    )
    
    $
    196,958Cost of goods sold
    
    
    85,294
    
    
    
    
    
    
    
    23,589
    
    
    
    (11,196
    )
    
    
    97,687Gross margin
    
    
    85,700
    
    
    
    11,196
    
    
    
    2,375
    
    
    
    
    
    
    
    99,271Operating expenses:Research and development
    
    
    60,215
    
    
    
    
    
    
    
    175
    
    
    
    
    
    
    
    60,390Selling, general and administrative
    
    
    19,603
    
    
    
    
    
    
    
    3,498
    
    
    
    
    
    
    
    23,101Amortization of intangible assets
    
    
    676
    
    
    
    244
    
    
    
    3,861
    
    
    
    
    
    
    
    4,781Asset impairments
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130Special charges
    
    
    5,412
    
    
    
    
    
    
    
    372
    
    
    
    
    
    
    
    5,784Total operating expenses
    
    
    86,036
    
    
    
    244
    
    
    
    7,906
    
    
    
    
    
    
    
    94,186Operating income (loss)
    
    
    (336
    )
    
    
    10,952
    
    
    
    (5,531
    )
    
    
    
    
    
    
    5,085Equity in income (loss) of subsidiaries
    
    
    9,081
    
    
    
    1,641
    
    
    
    
    
    
    
    (10,722
    )
    
    
    Interest expense
    
    
    (9,773
    )
    
    
    
    
    
    
    (1,790
    )
    
    
    
    
    
    
    (11,563
    )Other income (expense), net
    
    
    (11,183
    )
    
    
    
    
    
    
    5,838
    
    
    
    
    
    
    
    (5,345
    )Income (loss) before income taxes and
gain (loss) on equity method
investments
    
    
    (12,211
    )
    
    
    12,593
    
    
    
    (1,483
    )
    
    
    (10,722
    )
    
    
    (11,823
    )Provision for income taxes
    
    
    780
    
    
    
    
    
    
    
    388
    
    
    
    
    
    
    
    1,168Income (loss) before gain (loss) on
equity method investments
    
    
    (12,991
    )
    
    
    12,593
    
    
    
    (1,871
    )
    
    
    
    
    
    
    (10,722
    )Gain on equity method
investments
    
    
    3,773
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,773Net (loss)
income
    
    $
    (9,218
    )
    
    $
    12,593
    
    
    $
    (1,871
    )
    
    $
    (10,722
    )
    
    $
    (9,218
    )
 Fiscal Quarter Ended December 29, 2006Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenues
    
    $
    208,474
    
    
    $
    6,905
    
    
    $
    37,060
    
    
    $
    (6,905
    )
    
    $
    245,534Cost of goods sold
    
    
    108,205
    
    
    
    
    
    
    
    34,745
    
    
    
    (6,905
    )
    
    
    136,045Gross margin
    
    
    100,269
    
    
    
    6,905
    
    
    
    2,315
    
    
    
    
    
    
    
    109,489Operating expenses:Research and development
    
    
    70,487
    
    
    
    
    
    
    
    963
    
    
    
    
    
    
    
    71,450Selling, general and administrative
    
    
    23,613
    
    
    
    
    
    
    
    3,863
    
    
    
    
    
    
    
    27,476Amortization of intangible assets
    
    
    727
    
    
    
    5,256
    
    
    
    255
    
    
    
    
    
    
    
    6,238Special charges
    
    
    2,898
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,898Total operating expenses
    
    
    97,725
    
    
    
    5,256
    
    
    
    5,081
    
    
    
    
    
    
    
    108,062Operating income (loss)
    
    
    2,544
    
    
    
    1,649
    
    
    
    (2,766
    )
    
    
    
    
    
    
    1,427Equity in income (loss) of subsidiaries
    
    
    2,421
    
    
    
    465
    
    
    
    
    
    
    
    (2,886
    )
    
    
    Interest expense
    
    
    (11,342
    )
    
    
    
    
    
    
    (1,694
    )
    
    
    
    
    
    
    (13,036
    )Other income (expense), net
    
    
    7,748
    
    
    
    
    
    
    
    5,313
    
    
    
    
    
    
    
    13,061Income (loss) before income taxes and
gain (loss) on equity method
investments
    
    
    1,371
    
    
    
    2,114
    
    
    
    853
    
    
    
    (2,886
    )
    
    
    1,452Provision for income taxes
    
    
    390
    
    
    
    
    
    
    
    81
    
    
    
    
    
    
    
    471Income (loss) before gain (loss) on
equity method investments
    
    
    981
    
    
    
    2,114
    
    
    
    772
    
    
    
    (2,886
    )
    
    
    981Loss on equity method investments
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )Net income
(loss)
    
    $
    976
    
    
    $
    2,114
    
    
    $
    772
    
    
    $
    (2,886
    )
    
    $
    976
 25




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
  Fiscal Quarter Ended December 28, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    5,576
    
    
    $
    
    
    
    $
    (3,480
    )
    
    $
    5,832
    
    
    $
    7,928Cash flows from investing activities:Purchases of accounts receivable
    
    
    
    
    
    
    
    
    
    
    (145,848
    )
    
    
    145,848
    
    
    
    Collections of accounts receivable
    
    
    
    
    
    
    
    
    
    
    151,680
    
    
    
    (151,680
    )
    
    
    Purchases of equity securities and
other assets
    
    
    (755
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (755
    )Purchases of property and equipment
    
    
    (566
    )
    
    
    
    
    
    
    (1,048
    )
    
    
    
    
    
    
    (1,614
    )Net cash (used in) provided by
investing activities
    
    
    (1,321
    )
    
    
    
    
    
    
    4,784
    
    
    
    (5,832
    )
    
    
    (2,369
    )Cash flows from financing activities:Repayment of short-term debt, net
    
    
    
    
    
    
    
    
    
    
    (9,027
    )
    
    
    
    
    
    
    (9,027
    )Proceeds from common stock
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Net cash provided by (used in)
financing activities
    
    
    4
    
    
    
    
    
    
    
    (9,027
    )
    
    
    
    
    
    
    (9,023
    )Net increase (decrease) in cash and
cash equivalents
    
    
    4,259
    
    
    
    
    
    
    
    (7,723
    )
    
    
    
    
    
    
    (3,464
    )Cash and cash equivalents at
beginning of period
    
    
    199,263
    
    
    
    
    
    
    
    36,342
    
    
    
    
    
    
    
    235,605Cash and cash equivalents at end of
period
    
    $
    203,522
    
    
    $
    
    
    
    $
    28,619
    
    
    $
    
    
    
    $
    232,141
 26




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
 Fiscal Quarter Ended December 29, 2006Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (7,186
    )
    
    $
    
    
    
    $
    14,161
    
    
    $
    899
    
    
    $
    7,874Cash flows from investing activities:Purchases of marketable debt securities
    
    
    (12,094
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,094
    )Proceeds from sales and maturities of
marketable debt securities
    
    
    28,688
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,688Purchases of accounts receivable
    
    
    
    
    
    
    
    
    
    
    (168,825
    )
    
    
    168,825
    
    
    
    Collections of accounts receivable
    
    
    
    
    
    
    
    
    
    
    169,724
    
    
    
    (169,724
    )
    
    
    Proceeds from equity securities and
other assets
    
    
    436
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    436Purchases of property and equipment
    
    
    (3,065
    )
    
    
    
    
    
    
    (4,151
    )
    
    
    
    
    
    
    (7,216
    )Payments for acquisitions
    
    
    (5,029
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,029
    )Net cash provided by (used in)
investing activities
    
    
    8,936
    
    
    
    
    
    
    
    (3,252
    )
    
    
    (899
    )
    
    
    4,785Cash flows from financing activities:Proceeds from short-term debt, net
    
    
    
    
    
    
    
    
    
    
    (845
    )
    
    
    
    
    
    
    (845
    )Proceeds from long-term debt, net
    
    
    267,221
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267,221Proceeds from common stock
    
    
    2,243
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,243Repayment of shareholder notes
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Net cash provided by (used in)
financing activities
    
    
    269,485
    
    
    
    
    
    
    
    (845
    )
    
    
    
    
    
    
    268,640Net increase in cash and cash
equivalents
    
    
    271,235
    
    
    
    
    
    
    
    10,064
    
    
    
    
    
    
    
    281,299Cash and cash equivalents at beginning
of period
    
    
    175,398
    
    
    
    
    
    
    
    50,228
    
    
    
    
    
    
    
    225,626Cash and cash equivalents at end of
period
    
    $
    446,633
    
    
    $
    
    
    
    $
    60,292
    
    
    $
    
    
    
    $
    506,925
 13. Subsequent Events
    27




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
   Critical
Accounting Policies
  28




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##### Table of Contents



Business Enterprise Segments
   
    
    the nature of products and services;
    
    the nature of the production processes;
    
    the type or class of customer for their products and services; and
    
    the methods used to distribute their products or provide their services.
  
    
    the sale of semiconductor products is the only material source of revenue for each of
our four operating segments;
    
    the products sold by each of our operating segments use the same standard manufacturing
process;
    
    the products marketed by each of our operating segments are sold to similar customers;
and
    
    all of our products are sold through our internal sales force and common distributors.
  Results of Operations
 Net Revenues
   29




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##### Table of Contents



Gross Margin
    Excess and Obsolete Inventory
  Fiscal Quarter EndedDecember 28,
    
    
    December 29,(in thousands)
    
    2007
    
    
    2006E&O reserves at beginning of period
    
    $
    22,181
    
    
    $
    36,632Additions
    
    
    3,895
    
    
    
    1,570Release upon sales of product
    
    
    (1,238
    )
    
    
    (2,650
    )Scrap
    
    
    (1,611
    )
    
    
    (4,672
    )Standards adjustments and other
    
    
    72
    
    
    
    (87
    )E&O reserves at end of period
    
    $
    23,299
    
    
    $
    30,793
   30




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##### Table of Contents



Research and Development
   Selling, General and Administrative
   Amortization of Intangible Assets
   Special Charges
   Interest Expense
  31




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##### Table of Contents



Other
(expense) income, net
 Fiscal Quarter EndedDecember 28,
    
    
    December 29,(in thousands)
    
    2007
    
    
    2006Investment and interest income
    
    $
    2,771
    
    
    $
    5,389(Decrease)
increase in the fair value of derivative instruments
    
    
    (8,364
    )
    
    
    3,042Other
    
    
    248
    
    
    
    (71
    )Other
(expense) income, net
    
    $
    (5,345
    )
    
    $
    8,360
   Provision for Income Taxes
  Liquidity and Capital Resources
      32




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##### Table of Contents



Fiscal Quarter EndedDecember 28,
    
    
    December 29,(in thousands)
    
    2007
    
    
    2006Net cash provided by operating activities
    
    $
    7,928
    
    
    $
    7,874Net cash (used in) provided by investing activities
    
    
    (2,369
    )
    
    
    4,785Net cash (used in) provided by financing activities
    
    
    (9,023
    )
    
    
    268,640Net (decrease) increase in cash and cash equivalents
    
    $
    (3,464
    )
    
    $
    281,299
      33




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##### Table of Contents



Off-Balance Sheet Arrangements
   Special Purpose Entities
   Recent Accounting Pronouncements
   34




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##### Table of Contents



Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB 51
  35




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
       (in thousands)
    
    Carrying Value
    
    Fair ValueCash and cash equivalents
    
    $
    232,141
    
    
    $
    232,141Mindspeed warrant
    
    
    7,155
    
    
    
    7,155Short-term debt
    
    
    70,973
    
    
    
    70,973Long-term debt: senior secured notes
    
    
    275,000
    
    
    
    274,313Long-term debt: convertible subordinated notes
    
    
    250,000
    
    
    
    197,500
  36




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
   37




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 IPO Litigation 
 Class Action Suit  Graden v. Conexant, et al.
 38




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##### Table of Contents



Exhibit No.
    
    Description10.1
    
    Amendment to Employment Agreement and Separation and Release
Agreement dated as of October 2, 2007 between the Company and
Dennis E. OReilly, filed as Exhibit 10-k-14 to the Companys
Annual Report on Form 10-K for the year ended September 28,
2007, is incorporated herein by reference.10.2
    
    The Companys 2008 Peak Performance Incentive Plan.10.3
    
    Extension Letter Agreement dated October 11, 2007 by and among
Wachovia Bank, National Association, the Company and Conexant
USA, LLC with respect to the Receivables Purchase Agreement
dated as of November 29, 2005 by and between Conexant USA, LLC
and the Company, the Credit and Security Agreement dated as of
November 29, 2005 by and between Conexant USA, LLC and
Wachovia Bank, National Association and the Servicing
Agreement dated as of November 29, 2005 by and between the
Company and Conexant USA, LLC, filed as Exhibit 10-r-5 to the
Companys Annual Report on Form 10-K for the year ended
September 28, 2007, is incorporated herein by reference.31.1
    
    Certification of the Chief Executive Officer of Periodic
Report Pursuant to Rule 13a-15(e) or 15d-15(e).31.2
    
    Certification of the Chief Financial Officer of Periodic
Report Pursuant to Rule 13a-15(e) or 15d-15(e).32
    
    Certification by Chief Executive Officer and Chief Financial
Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350.
 39




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##### Table of Contents



SIGNATURE
  CONEXANT SYSTEMS, INC.
(Registrant)Date:  February 5, 2008
    By
    /s/ KAREN ROSCHERKaren RoscherSenior Vice President and Chief Financial Officer
(principal financial officer) 40




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description10.1
    
    Amendment to Employment Agreement and Separation and Release
Agreement dated as of October 2, 2007 between the Company and
Dennis E. OReilly, filed as Exhibit 10-k-14 to the Companys
Annual Report on Form 10-K for the year ended September 28,
2007, is incorporated herein by reference.10.2
    
    The Companys 2008 Peak Performance Incentive Plan.10.3
    
    Extension Letter Agreement dated October 11, 2007 by and among
Wachovia Bank, National Association, the Company and Conexant
USA, LLC with respect to the Receivables Purchase Agreement
dated as of November 29, 2005 by and between Conexant USA, LLC
and the Company, the Credit and Security Agreement dated as of
November 29, 2005 by and between Conexant USA, LLC and
Wachovia Bank, National Association and the Servicing
Agreement dated as of November 29, 2005 by and between the
Company and Conexant USA, LLC, filed as Exhibit 10-r-4 to the
Companys Annual Report on Form 10-K for the year ended
September 28, 2007, is incorporated herein by reference.31.1
    
    Certification of the Chief Executive Officer of Periodic
Report Pursuant to Rule 13a-15(e) or 15d-15(e).31.2
    
    Certification of the Chief Financial Officer of Periodic
Report Pursuant to Rule 13a-15(e) or 15d-15(e).32
    
    Certification by Chief Executive Officer and Chief Financial
Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350.
 41