##### Table of Contents



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 April 1, 2011
 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
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




---



##### Table of Contents



FORWARD-LOOKING STATEMENTS
  
    
    our expectations regarding our proposed merger transaction with Gold Holdings, Inc.;
    
    our expectations regarding the market share of our products, growth in the markets we serve and our market opportunities;
    
    our expectations regarding price and product competition;
    
    our expectations regarding continued demand and future growth in demand for our products in the communications, PC and
consumer markets we serve;
    
    our expectations regarding the declines in our legacy products;
    
    our plans and expectations regarding the transition of our semiconductor products to smaller line width geometries;
    
    our expectation that we will be able to sustain the recoverability of our goodwill, intangible and tangible long-term assets;
    
    our product development plans;
    
    our expectation that our largest customers will continue to account for a substantial portion of our revenue;
    
    our expectations regarding our contractual obligations and commitments;
    
    our expectation that we will be able to protect our products and services with proprietary technology and intellectual
property protection;
    
    our expectation that we will be able to meet our lease obligations (and other financial commitments);
    
    our expectations, subject to the qualifications expressed, regarding the sufficiency of our existing sources of liquidity,
together with cash expected to be generated from operations, to fund our operations, research and development, anticipated
capital expenditures, and working capital for at least the next twelve months;
    
    our expectation that we will be able to continue to rely on third party manufacturers to manufacture, assemble and test our
products to meet our customers demands; and
    
    our expectations that we will be able to use our net operating losses and other tax attributes to offset future taxable income.
  1




---



##### 



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
INDEX
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Financial Statements:Unaudited Consolidated Balance Sheets  April 1, 2011 and October 1, 2010
    
    
    3Unaudited Consolidated Statements of Operations  Fiscal Quarter and Six Fiscal Months Ended April 1,
2011 and April 2, 2010
    
    
    4Unaudited Consolidated Statements of Cash Flows  Six Fiscal Months Ended April 1, 2011 and April 2, 2010
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    24Item 1A. Risk Factors
    
    
    24Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25SIGNATURE
    
    
    26EX-31.1EX-31.2EX-32
  2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except for par value amount)
 April 1,
    
    
    October 1,2011
    
    
    2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    65,172
    
    
    $
    54,466Marketable securities
    
    
    
    
    
    
    20,059Receivables, net of allowance of $368 at April 1, 2011 and October 1, 2010
    
    
    26,412
    
    
    
    31,463Inventories
    
    
    8,400
    
    
    
    8,747Other current assets
    
    
    10,591
    
    
    
    14,690Assets held for sale
    
    
    
    
    
    
    13,059Total current assets
    
    
    110,575
    
    
    
    142,484Property, plant and equipment, net of accumulated depreciation of $26,561 and $30,050 at
April 1, 2011 and October 1, 2010, respectively
    
    
    5,145
    
    
    
    6,080Goodwill
    
    
    109,908
    
    
    
    109,908Other assets
    
    
    41,423
    
    
    
    47,372Total assets
    
    $
    267,051
    
    
    $
    305,844LIABILITIES AND SHAREHOLDERS (DEFICIT) EQUITYCurrent liabilities:Short-term debt
    
    
    
    
    
    
    10,978Accounts payable
    
    
    12,097
    
    
    
    12,516Accrued compensation and benefits
    
    
    6,987
    
    
    
    7,682Other current liabilities
    
    
    28,651
    
    
    
    31,836Total current liabilities
    
    
    47,735
    
    
    
    63,012Long-term debt
    
    
    173,706
    
    
    
    173,543Other liabilities
    
    
    58,497
    
    
    
    57,197Total liabilities
    
    
    279,938
    
    
    
    293,752Commitments and contingencies (Note 5)Shareholders (deficit) equity:Preferred and junior preferred stock: 20,000 and 5,000 shares authorized, respectively
    
    
    
    
    
    
    Common stock, $0.01 par value: 200,000 shares authorized; 82,223 and 81,273
shares issued and outstanding at April 1, 2011 and October 1, 2010, respectively
    
    
    823
    
    
    
    813Additional paid-in capital
    
    
    4,922,697
    
    
    
    4,919,582Accumulated deficit
    
    
    (4,938,006
    )
    
    
    (4,909,509
    )Accumulated other comprehensive income
    
    
    1,599
    
    
    
    1,206Total shareholders (deficit) equity
    
    
    (12,887
    )
    
    
    12,092Total liabilities and shareholders (deficit) equity
    
    $
    267,051
    
    
    $
    305,844
  3




---



##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS  (in thousands, except per share data)
 Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 1,
    
    
    April 2,
    
    
    April 1,
    
    
    April 2,2011
    
    
    2010
    
    
    2011
    
    
    2010Net revenues
    
    $
    43,129
    
    
    $
    61,868
    
    
    $
    89,239
    
    
    $
    123,681Cost of goods sold
    
    
    18,907
    
    
    
    24,087
    
    
    
    37,616
    
    
    
    48,291Gross margin
    
    
    24,222
    
    
    
    37,781
    
    
    
    51,623
    
    
    
    75,390Operating expenses:Research and development
    
    
    14,562
    
    
    
    14,100
    
    
    
    28,110
    
    
    
    27,345Selling, general and administrative
    
    
    11,101
    
    
    
    12,681
    
    
    
    22,288
    
    
    
    25,083Amortization of intangible assets
    
    
    284
    
    
    
    284
    
    
    
    568
    
    
    
    680Gain on sale of intellectual property
    
    
    
    
    
    
    
    
    
    
    (1,249
    )
    
    
    Special charges (credits)
    
    
    12,948
    
    
    
    (210
    )
    
    
    15,230
    
    
    
    136Total operating expenses
    
    
    38,895
    
    
    
    26,855
    
    
    
    64,947
    
    
    
    53,244Operating (loss) income
    
    
    (14,673
    )
    
    
    10,926
    
    
    
    (13,324
    )
    
    
    22,146Interest expense
    
    
    5,510
    
    
    
    7,775
    
    
    
    11,224
    
    
    
    17,278Other (income) expense, net
    
    
    (1,206
    )
    
    
    (7,755
    )
    
    
    4,645
    
    
    
    (14,959
    )(Loss) income from continuing operations before income taxes
and income
(loss) on equity method investments
    
    
    (18,977
    )
    
    
    10,906
    
    
    
    (29,193
    )
    
    
    19,827Income tax provision
    
    
    316
    
    
    
    331
    
    
    
    410
    
    
    
    101(Loss) income from continuing operations before income (loss)
on equity
method investments
    
    
    (19,293
    )
    
    
    10,575
    
    
    
    (29,603
    )
    
    
    19,726Income (loss) on equity method investments
    
    
    832
    
    
    
    209
    
    
    
    1,495
    
    
    
    (245
    )(Loss) income from continuing operations
    
    
    (18,461
    )
    
    
    10,784
    
    
    
    (28,108
    )
    
    
    19,481(Loss) income from discontinued operations, net of tax
    
    
    (358
    )
    
    
    95
    
    
    
    (389
    )
    
    
    (268
    )Net (loss) income
    
    $
    (18,819
    )
    
    $
    10,879
    
    
    $
    (28,497
    )
    
    $
    19,213(Loss) income per share from continuing operations  basic
    
    $
    (0.22
    )
    
    $
    0.16
    
    
    $
    (0.34
    )
    
    $
    0.30(Loss) income per share from continuing operations  diluted
    
    $
    (0.22
    )
    
    $
    0.15
    
    
    $
    (0.34
    )
    
    $
    0.30(Loss) income per share from discontinued operations  basic
    
    $
    (0.01
    )
    
    $
    0.00
    
    
    $
    (0.01
    )
    
    $
    0.00(Loss) income per share from discontinued operations  diluted
    
    $
    (0.01
    )
    
    $
    0.00
    
    
    $
    (0.01
    )
    
    $
    (0.01
    )(Loss) income per share  basic
    
    $
    (0.23
    )
    
    $
    0.16
    
    
    $
    (0.35
    )
    
    $
    0.30(Loss) income per share  diluted
    
    $
    (0.23
    )
    
    $
    0.15
    
    
    $
    (0.35
    )
    
    $
    0.29Shares used in basic per-share computations
    
    
    82,159
    
    
    
    69,136
    
    
    
    81,973
    
    
    
    64,579Shares used in diluted per-share computations
    
    
    82,159
    
    
    
    70,513
    
    
    
    81,973
    
    
    
    65,273
  4




---



##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS  (in thousands)
 Six Fiscal Months EndedApril 1,
    
    
    April 2,2011
    
    
    2010Cash flows from operating activities:Net (loss) income
    
    $
    (28,497
    )
    
    $
    19,213Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:Depreciation
    
    
    1,306
    
    
    
    1,906Amortization of intangible assets
    
    
    568
    
    
    
    680Reversal of provision for bad debts, net
    
    
    
    
    
    
    (120
    )Charges for inventory provisions, net
    
    
    458
    
    
    
    32Amortization of debt discount
    
    
    402
    
    
    
    6,979Deferred income taxes
    
    
    (20
    )
    
    
    118Stock-based compensation
    
    
    3,712
    
    
    
    3,321Decrease (increase) in fair value of derivative instruments
    
    
    5,779
    
    
    
    (18,201
    )(Gains) losses on equity method investments
    
    
    (1,495
    )
    
    
    1,099Loss on termination of swap
    
    
    
    
    
    
    1,728Loss on extinguishment of debt
    
    
    
    
    
    
    10,605Net gain on sale of equity securities
    
    
    (1,393
    )
    
    
    (7,734
    )Gain on sale of intellectual property
    
    
    (1,249
    )
    
    
    Other items, net
    
    
    (301
    )
    
    
    234Changes in assets and liabilities:Receivables
    
    
    5,051
    
    
    
    2,432Inventories
    
    
    (111
    )
    
    
    (386
    )Accounts payable
    
    
    (461
    )
    
    
    (9,935
    )Accrued expenses and other current liabilities
    
    
    (4,700
    )
    
    
    1,065Other, net
    
    
    1,013
    
    
    
    (1,817
    )Net cash (used in) provided by operating activities
    
    
    (19,938
    )
    
    
    11,219Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (751
    )
    
    
    (525
    )Proceeds from sale of real estate, net of closing costs of $439
    
    
    21,087
    
    
    
    Proceeds from sale of property, plant and equipment
    
    
    52
    
    
    
    397Payments for acquisitions
    
    
    
    
    
    
    (625
    )Proceeds from maturity of marketable securities
    
    
    20,000
    
    
    
    Proceeds from sales of equity securities
    
    
    802
    
    
    
    8,030Release of restricted cash
    
    
    70
    
    
    
    8,500Proceeds from sale of intellectual property
    
    
    1,249
    
    
    
    Net cash provided by investing activities
    
    
    42,509
    
    
    
    15,777Cash flows from financing activities:Net repayments of short-term debt, including debt costs of $60 and $483
    
    
    (11,278
    )
    
    
    (29,136
    )Extinguishment of long-term debt
    
    
    
    
    
    
    (166,676
    )Proceeds from common stock offerings, net of expenses of $4,872
    
    
    
    
    
    
    62,519Proceeds from issuance of long-term bonds, net of expenses of $4,911
    
    
    
    
    
    
    168,449Proceeds from issuance of common stock under employee stock plans
    
    
    94
    
    
    
    18Repurchase of shares upon exercise of employee stock awards
    
    
    (681
    )
    
    
    (29
    )Net cash (used in) provided by financing activities
    
    
    (11,865
    )
    
    
    35,145Net increase in cash and cash equivalents
    
    
    10,706
    
    
    
    62,141Cash and cash equivalents at beginning of period
    
    
    54,466
    
    
    
    125,385Cash and cash equivalents at end of period
    
    $
    65,172
    
    
    $
    187,526
  5




---



##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
 
 Notes to Unaudited Consolidated Financial Statements
 1. Basis of Presentation and Significant Accounting Policies
  Termination of Merger Agreement with Standard Microsystems Corporation
  Pending Merger with Gold Holdings, Inc.
  Interim Reporting
  Fiscal Periods
 Use of Estimates
 Revenue Recognition
 6




---



##### Table of Contents



Marketable Securities
  Restricted Cash
 Inventories
 Investments 
 Accounting for Convertible Debt
 Derivative Financial Instruments
 Supplemental Cash Flow Information
 Net (Loss) Income Per Share
  7




---



##### Table of Contents



Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 1,
    
    
    April 2,
    
    
    April 1,
    
    
    April 2,2011
    
    
    2010
    
    
    2011
    
    
    2010Employee stock options and restricted stock units
    
    
    1,960
    
    
    
    3,386
    
    
    
    3,164
    
    
    
    3,6494.00% convertible subordinated notes due March 2026
    
    
    150
    
    
    
    4,676
    
    
    
    189
    
    
    
    4,8022,110
    
    
    
    8,062
    
    
    
    3,353
    
    
    
    8,451
  Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 1,
    
    
    April 2,
    
    
    April 1,
    
    
    April 2,2011
    
    
    2010
    
    
    2011
    
    
    2010Weighted average shares for basic net (loss)
income per share
    
    
    82,159
    
    
    
    69,136
    
    
    
    81,973
    
    
    
    64,579Employee stock options and restricted stock units
    
    
    
    
    
    
    1,377
    
    
    
    
    
    
    
    694Weighted average shares for diluted (loss) income
per share
    
    
    82,159
    
    
    
    70,513
    
    
    
    81,973
    
    
    
    65,273
 Goodwill 
 Recently Issued Accounting Pronouncements
  2. Sale of Real property
  Land
    
    $
    1,662Land and leasehold improvements, net
    
    
    356Buildings, net
    
    
    5,610Machinery and equipment, net
    
    
    262Site development costs
    
    
    7,691$
    15,581
   8




---



##### Table of Contents



3. Fair Value of Certain Financial Assets and Liabilities
     4. Supplemental Financial Information
 Inventories
  April 1,
    
    
    October 1,2011
    
    
    2010Work-in-process
    
    $
    4,959
    
    
    $
    4,840Finished goods
    
    
    3,441
    
    
    
    3,907Total inventories
    
    $
    8,400
    
    
    $
    8,747
 Intangible Assets
  April 1, 2011
    
    
    October 1, 2010Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Book
    
    
    Carrying
    
    
    Accumulated
    
    
    BookAmount
    
    
    Amortization
    
    
    Value
    
    
    Amount
    
    
    Amortization
    
    
    ValueProduct licenses
    
    $
    2,400
    
    
    $
    (1,187
    )
    
    $
    1,213
    
    
    $
    2,400
    
    
    $
    (1,004
    )
    
    $
    1,396Other intangible assets
    
    
    6,830
    
    
    
    (4,303
    )
    
    
    2,527
    
    
    
    6,830
    
    
    
    (3,918
    )
    
    
    2,912$
    9,230
    
    
    $
    (5,490
    )
    
    $
    3,740
    
    
    $
    9,230
    
    
    $
    (4,922
    )
    
    $
    4,308
  Fiscal Year Ending2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    ThereafterAmortization expense
    
    $
    569
    
    
    $
    1,137
    
    
    $
    1,027
    
    
    $
    439
    
    
    $
    150
    
    
    $
    418
 Mindspeed Warrant
  9




---



##### Table of Contents



Debt
  April 1,
    
    
    October 1,2011
    
    
    2010Short-term debt:4.00% convertible subordinated notes due March 2026, net of debt discount of $240
    
    $
    
    
    
    $
    10,978Long-term debt:11.25% senior secured notes due March 2015, net of discount of $1,294 and $1,457
    
    $
    173,706
    
    
    $
    173,543
 11.25% senior secured notes due 2015 In March 2010, the Company issued $175.0 million aggregate
principal amount of senior secured notes due 2015 (senior notes) that mature on March 15, 2015.
The senior notes were sold at 99.06% of the principal amount, resulting in gross proceeds of
approximately $173.4 million. Deferred debt offering expenses were approximately $4.9 million and
are being amortized over the term of the debt. The senior notes have not been registered under the
Securities Act of 1933, as amended, and may not be sold in the United States absent registration or
an applicable exemption from registration requirements. The senior notes accrue interest at a rate
of 11.25% per annum payable semiannually on March 15 and September 15 of each year, commencing on
September 15, 2010. The obligations under the senior notes are fully and unconditionally
guaranteed, jointly and severally, on a senior secured basis, by all of the Companys domestic
subsidiaries (except for Conexant CF, LLC, the Companys receivables financing subsidiary). In
addition, the senior notes and the note guarantees are secured by liens on substantially all of the
Companys and the guarantors tangible and intangible property, subject to certain exceptions and
permitted liens. On or after March 15, 2013, the Company may redeem all or a part of the senior
notes at a price of 105.625% of the principal amount of the senior notes during the remainder of
2013 and 100.00% of the principal amount of the senior notes thereafter, plus accrued and unpaid
interest, if any, to the applicable redemption date. In addition, at any time prior to March 15,
2013, the Company may, on one or more occasions, redeem all or a part of the senior notes at any
time at a redemption price equal to 100% of the principal amount of the senior notes redeemed, plus
a make-whole premium, plus accrued and unpaid interest, if any, to the applicable redemption
date. On or after January 1, 2011 until March 15, 2013, the Company may also redeem up to 35% of
the original aggregate principal amount of the senior notes, using the proceeds of certain
qualified equity offerings, at a redemption price of 111.25% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the applicable redemption date. If a change of control
occurs (which would include the consummation of the proposed merger transaction with Parent), the
Company must offer to repurchase the senior notes at a repurchase price equal to 101% of the
principal amount of the senior notes repurchased, plus accrued and unpaid interest, if any, to the
applicable repurchase date. In addition, certain asset dispositions will be triggering events that
may require the Company to use the proceeds from those sales to make an offer to repurchase the
senior notes at a repurchase price equal to 100% of the principal amount of the senior notes
repurchased, plus accrued and unpaid interest, if any, to the applicable repurchase date if such
proceeds are not otherwise invested in the Companys business within a specific period of time. The
senior notes and the note guarantees rank senior to all of the Companys and the guarantors
existing and future subordinated indebtedness, including the convertible notes, but they are
structurally subordinated to all existing and future indebtedness and other liabilities (including
non-trade payables) of the Companys non-guarantor subsidiaries.4.00% convertible subordinated notes due March 2026 In March 2006, the Company issued $200.0 million principal amount of convertible notes and, in May 2006, the initial purchaser of the convertible notes exercised its option to purchase an additional $50.0 million principal amount of the convertible notes. Total proceeds to the Company from these issuances, net of issuance costs, were $243.6 million.
The convertible notes were general unsecured obligations of the Company. Interest on the convertible notes was payable in arrears semiannually on each March 1 and September 1, beginning on September 1, 2006. The convertible notes were convertible, at the option of the holder upon satisfaction of certain conditions, into shares of the Companys common stock at a conversion price of $49.20 per share, subject to adjustment for
certain events. Upon conversion, the Company had the right to deliver, in lieu of common stock, cash or a combination of cash and common stock. Beginning on March 1, 2011, the convertible notes could be redeemed at the Companys option at a price equal to 100% of the principal amount, plus any accrued and unpaid interest. Holders could require the Company to repurchase, for cash, all or part of their convertible notes on March 1, 2011,
March 1,2016 and March 1, 2021 at a price of 100% of the principal amount, plus any accrued and unpaid interest. The Company redeemed its remaining $l1.2 million of convertible notes on March 1,2011. Accounts Receivable Financing Facility
  10




---



##### Table of Contents



5. Commitments and Contingencies
 Legal Matters
 Litigation Relating to the Previously Contemplated Merger with SMSC
    Gold Merger Termination Fee
  Other Legal Matters
  Guarantees and Indemnifications
  11




---



##### Table of Contents



6. Stock-Based Award Plans
  Stock Options
   Weighted AverageShares
    
    
    Exercise PriceOutstanding, October 1, 2010
    
    
    2,296
    
    
    $
    21.45Granted
    
    
    
    
    
    
    Exercised
    
    
    (1
    )
    
    
    0.70Forfeited
    
    
    (703
    )
    
    
    21.86Outstanding, April 1, 2011
    
    
    1,592
    
    
    
    21.27Shares vested and expected to vest, April 1, 2011
    
    
    1,591
    
    
    
    21.28Exercisable, April 1, 2011
    
    
    1,560
    
    
    $
    21.59
   Restricted Stock Units
   12




---



##### Table of Contents



WeightedAverage GrantDate FairShares
    
    
    ValueOutstanding, October 1, 2010
    
    
    4,773
    
    
    $
    2.69Granted
    
    
    230
    
    
    
    1.68Vested
    
    
    (1,337
    )
    
    
    2.81Forfeited
    
    
    (63
    )
    
    
    2.12Outstanding, April 1, 2011
    
    
    3,603
    
    
    $
    2.59
  Employee Stock Purchase Plan
  7. Comprehensive (Loss) Income
  Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 1,
    
    
    April 2,
    
    
    April 1,
    
    
    April 2,2011
    
    
    2010
    
    
    2011
    
    
    2010Net (loss) income
    
    $
    (18,819
    )
    
    $
    10,879
    
    
    $
    (28,497
    )
    
    $
    19,213Other comprehensive income (loss):Foreign currency translation adjustments
    
    
    428
    
    
    
    427
    
    
    
    406
    
    
    
    820Unrealized gains on marketable securities
    
    
    (8
    )
    
    
    10,469
    
    
    
    (13
    )
    
    
    10,469Realized loss on interest rate swap contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,728Other comprehensive income
    
    
    420
    
    
    
    10,896
    
    
    
    393
    
    
    
    13,017Comprehensive (loss) income
    
    $
    (18,399
    )
    
    $
    21,775
    
    
    $
    (28,104
    )
    
    $
    32,230
  April 1,
    
    
    October 1,2011
    
    
    2010Foreign currency translation adjustments
    
    
    1,599
    
    
    
    1,193Unrealized gains on available-for-sale securities
    
    
    
    
    
    
    13Accumulated other comprehensive income
    
    $
    1,599
    
    
    $
    1,206
 8. Income Taxes
  13




---



##### Table of Contents



9. Gain on Sale of Intellectual Property
  10. Special Charges (Credits)
  Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 1,
    
    
    April 2,
    
    
    April 1,
    
    
    April 2,2011
    
    
    2010
    
    
    2011
    
    
    2010Merger transaction charges
    
    $
    11,570
    
    
    $
    
    
    
    $
    11,570
    
    
    $
    Other special charges
    
    
    1,062
    
    
    
    
    
    
    
    3,008
    
    
    
    Restructuring charges (credits)
    
    
    316
    
    
    
    (210
    )
    
    
    652
    
    
    
    136$
    12,948
    
    
    $
    (210
    )
    
    $
    15,230
    
    
    $
    136
   Restructuring Charges
  Restructuring Accruals
 Fiscal 2009 Restructuring Actions
  WorkforceReductionsRestructuring balance, October 1, 2010
    
    $
    53Charged to costs and expenses
    
    
    (8
    )Cash payments
    
    
    (45
    )Restructuring balance, April 1, 2011
    
    $
    
 14




---



##### Table of Contents



Fiscal 2008 Restructuring Actions
  Facilityand OtherRestructuring balance, October 1, 2010
    
    
    74Charged to costs and expenses
    
    
    4Cash payments
    
    
    (29
    )Restructuring balance, April 1, 2011
    
    $
    49
 Fiscal 2007 Restructuring Actions
  Facilityand OtherRestructuring balance, October 1, 2010
    
    $
    22,845Charged to costs and expenses
    
    
    979Cash payments
    
    
    (4,027
    )Restructuring balance, April 1, 2011
    
    $
    19,797
 Fiscal 2006 and 2005 Restructuring Actions
  Facilityand OtherRestructuring balance, October 1, 2010
    
    $
    10,849Charged to costs and expenses
    
    
    450Cash payments
    
    
    (1,012
    )Restructuring balance, April 1, 2011
    
    $
    10,287
 11. Other (Income) Expense, net
  Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 1,
    
    
    April 2,
    
    
    April 1,
    
    
    April 2,2011
    
    
    2010
    
    
    2011
    
    
    2010Investment and interest income
    
    $
    (80
    )
    
    $
    (64
    )
    
    $
    (146
    )
    
    $
    (120
    )Gain on sale of investments
    
    
    
    
    
    
    (3,621
    )
    
    
    (1,393
    )
    
    
    (7,734
    )Loss on extinguishment of debt
    
    
    
    
    
    
    9,481
    
    
    
    
    
    
    
    10,605(Increase) decrease in the fair value of derivative instruments
    
    
    (1,497
    )
    
    
    (13,916
    )
    
    
    5,779
    
    
    
    (18,201
    )Other
    
    
    371
    
    
    
    365
    
    
    
    405
    
    
    
    491Other (income) expense, net
    
    $
    (1,206
    )
    
    $
    (7,755
    )
    
    $
    4,645
    
    
    $
    (14,959
    )
  15




---



##### Table of Contents



12. Related Party Transactions
 Mindspeed Technologies, Inc.
  13. Geographic Information
  Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 1,
    
    
    April 2,
    
    
    April 1,
    
    
    April 2,2011
    
    
    2010
    
    
    2011
    
    
    2010United States
    
    $
    2,284
    
    
    $
    3,103
    
    
    $
    5,201
    
    
    $
    5,841Other Americas
    
    
    224
    
    
    
    1,129
    
    
    
    698
    
    
    
    2,385Total Americas
    
    
    2,508
    
    
    
    4,232
    
    
    
    5,899
    
    
    
    8,226China
    
    
    25,118
    
    
    
    35,461
    
    
    
    51,180
    
    
    
    71,211Taiwan
    
    
    5,253
    
    
    
    7,003
    
    
    
    9,517
    
    
    
    12,593Asia-Pacific
    
    
    9,834
    
    
    
    14,483
    
    
    
    21,873
    
    
    
    29,948Total Asia-Pacific
    
    
    40,205
    
    
    
    56,947
    
    
    
    82,570
    
    
    
    113,752Europe, Middle East and Africa
    
    
    416
    
    
    
    689
    
    
    
    770
    
    
    
    1,703$
    43,129
    
    
    $
    61,868
    
    
    $
    89,239
    
    
    $
    123,681
   April 1,
    
    
    October 1,2011
    
    
    2010United States
    
    $
    24,523
    
    
    $
    24,389India
    
    
    915
    
    
    
    1,022China
    
    
    418
    
    
    
    546Asia-Pacific
    
    
    640
    
    
    
    1,092Europe, Middle East and Africa
    
    
    
    
    
    
    1$
    26,496
    
    
    $
    27,050
  16




---



##### Table of Contents



14. Subsequent Events
  17




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
  Termination of Merger Agreement with Standard Microsystems Corporation
  Pending Merger with Gold Holdings, Inc.
  Sale of Real Property
  Land
    
    $
    1,662Land and leasehold improvements, net
    
    
    356Buildings, net
    
    
    5,610Machinery and equipment, net
    
    
    262Site development costs
    
    
    7,691$
    15,581
   18




---



##### Table of Contents



Critical Accounting Policies
  Results of Operations
 Net Revenues
     Gross Margin
    Research and Development
    19




---



##### Table of Contents



Selling, General and Administrative
    Amortization of Intangible Assets
   Sale of Intellectual Property
  Special Charges (Credits)
  Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 1,
    
    
    April 2,
    
    
    April 1,
    
    
    April 2,2011
    
    
    2010
    
    
    2011
    
    
    2010Merger transaction charges
    
    $
    11,570
    
    
    $
    
    
    
    $
    11,570
    
    
    $
    Other special charges
    
    
    1,062
    
    
    
    
    
    
    
    3,008
    
    
    
    Restructuring charges (credits)
    
    
    316
    
    
    
    (210
    )
    
    
    652
    
    
    
    136$
    12,948
    
    
    $
    (210
    )
    
    $
    15,230
    
    
    $
    136
   Interest Expense
   Other (Income) Expense, net
  20




---



##### Table of Contents



Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 1,
    
    
    April 2,
    
    
    April 1,
    
    
    April 2,2011
    
    
    2010
    
    
    2011
    
    
    2010Investment and interest income
    
    $
    (80
    )
    
    $
    (64
    )
    
    $
    (146
    )
    
    $
    (120
    )Gain on sale of investments
    
    
    
    
    
    
    (3,621
    )
    
    
    (1,393
    )
    
    
    (7,734
    )Loss on extinguishment of debt
    
    
    
    
    
    
    9,481
    
    
    
    
    
    
    
    10,605(Increase) decrease in the fair value of derivative instruments
    
    
    (1,497
    )
    
    
    (13,916
    )
    
    
    5,779
    
    
    
    (18,201
    )Other
    
    
    371
    
    
    
    365
    
    
    
    405
    
    
    
    491Other (income) expense, net
    
    $
    (1,206
    )
    
    $
    (7,755
    )
    
    $
    4,645
    
    
    $
    (14,959
    )
   Provision for Income Taxes
  Liquidity and Capital Resources
    Six Fiscal Months EndedApril 1,
    
    
    April 2,2011
    
    
    2010Net cash (used in) provided by operating activities
    
    $
    (19,938
    )
    
    $
    11,219Net cash provided by investing activities
    
    
    42,509
    
    
    
    15,777Net cash (used in) provided by financing activities
    
    
    (11,865
    )
    
    
    35,145Net increase in cash and cash equivalents
    
    $
    10,706
    
    
    $
    62,141
 Operating Activities
  Investing Activities
 21




---



##### Table of Contents



Financing Activities
  Recent Financing Transactions
     Contractual Obligations and Commitments
  Off-Balance Sheet Arrangements
    Special Purpose Entities
  22




---



##### Table of Contents



Recently Issued Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
      Carrying Value
    
    
    Fair ValueCash and cash equivalents
    
    $
    65,172
    
    
    $
    65,172Mindspeed warrant
    
    
    14,906
    
    
    
    14,906Long-term restricted cash
    
    
    5,530
    
    
    
    5,530Long-term debt: senior secured notes
    
    
    175,000
    
    
    
    194,250
 Exchange Rate Risk
  23




---



##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
   
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Litigation Relating to the Previously Contemplated Merger with SMSC
    
 ITEM 1A. RISK FACTORS
  Risks Factors Related to the Merger with Gold Holdings, Inc.
 Failure to consummate or delay in consummating the merger with Gold Holdings, Inc. announced on
February 23, 2011 for any reason could materially and adversely affect our operations and our stock
price.
  
    
    we could be required to pay to
Gold Holdings, Inc. a
termination fee of $7.7
million under certain
circumstances as set forth in
the merger agreement;
    
    the market price of our common
stock may decline to the
extent that the current market
price of our common stock
reflects a market assumption
that the merger will be
consummated;
 24




---



##### Table of Contents




    
    the possibility exists that
certain key employees may
terminate their employment
with us as a result of the
proposed merger with Gold
Holdings, Inc. even if the
proposed merger is not
ultimately consummated; and
    
    the diversion of managements
attention away from our
day-to-day business,
limitations on the conduct of
our business prior to
completing the merger, and
other restrictive covenants
contained in the merger
agreement that may impact the
manner in which our management
is able to conduct the
business of the company during
the period prior to the
consummation of the merger and
the unavoidable disruption to
our employees and our
relationships with customers
and suppliers during the
period prior to the
consummation of the merger,
may make it difficult for us
to regain our financial and
market position if the merger
does not occur.
  Legal proceedings in connection with the
terminated merger agreement with Standard
Microsystems Corporation (SMSC) could adversely
affect our business and divert managements
attention and resources from other matters.
  Risks Factors Related to Our Business
 Natural disasters in certain regions could adversely affect our
supply chain or our customer base which, in turn, could have a
negative impact on our business, the cost of and demand for our
products and our results of operations.
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 2.1
    
    Agreement and Plan of Merger, dated January 9, 2011, among the Company, Standard Microsystems Corporation and Comet
Acquisition Corp. (incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form 8-K filed on January
10, 2011).2.2
    
    Agreement and Plan of Merger, dated as of February 20, 2011, among the Company, Gold Holdings, Inc. and Gold Acquisition
Corp. (incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form 8-K filed on February 23, 2011).31.1
    
    Certification of the Chief Executive Officer of Periodic Report Pursuant to Rule 13a-15(a) or 15d-15(a).31.2
    
    Certification of the Chief Financial Officer of Periodic Report Pursuant to Rule 13a-15(a) or 15d-15(a).32
    
    Certification by Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350.
 
 *
    
    Management contract or compensatory plan or arrangement.
    
    Exhibits and schedules omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Company agrees to furnish a supplemental copy
of an omitted exhibit or schedule to the SEC upon request. 25




---



##### Table of Contents



SIGNATURE
  CONEXANT SYSTEMS, INC.
(Registrant)Date: April 15, 2011
    By
    /s/ JEAN HUJean HuChief Financial Officer, Treasurer and
Senior Vice President, Business Development
(principal financial officer) 26




---



##### Table of Contents



ExhibitNo.
    
    Description2.1
    
    Agreement and Plan of Merger, dated January 9, 2011, among the Company, Standard Microsystems Corporation and Comet
Acquisition Corp. (incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form 8-K filed on January
10, 2011).2.2
    
    Agreement and Plan of Merger, dated as of February 20, 2011, among the Company, Gold Holdings, Inc. and Gold Acquisition
Corp. (incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form 8-K filed on February 23, 2011).31.1
    
    Certification of the Chief Executive Officer of Periodic Report Pursuant to Rule 13a-15(a) or 15d-15(a).31.2
    
    Certification of the Chief Financial Officer of Periodic Report Pursuant to Rule 13a-15(a) or 15d-15(a).32
    
    Certification by Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350.
 
 *
    
    Management contract or compensatory plan or arrangement.
    
    Exhibits and schedules omitted pursuant to Item 601(b)(2) of
Regulation S-K. The Company agrees to furnish a supplemental copy
of an omitted exhibit or schedule to the SEC upon request. 27