These adjustments reconcile the Company's GAAP results of operations to the reported non-GAAP results of operations. The Company believes that presentation of net income and net income per share excluding non-cash equity- based compensation, amortization of intangible assets, restructuring costs, acquired in-process research and development, integration and acquisition expenses in connection with the acquisition of Chipidea provides meaningful supplemental information to investors, as well as management that is indicative of the Company's ongoing operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and budgeting purposes. These non-GAAP measures should not be viewed as a substitute for the Company's GAAP results, and may be different than non-GAAP measures used by other companies.
(a) This adjustment reflects the non-cash equity-based compensation expense related to SFAS No. 123 revised (SFAS 123R). For the second fiscal quarter ending December 31, 2008, $1.3 million of equity-based compensation was allocated as follows: $463,000 to research and development, $398,000 to sales and marketing and $451,000 to general and administrative. For the first fiscal quarter ending September 30, 2008, $1.2 million of equity-based compensation expense was allocated as follows: $202,000 to research and development, $433,000 to sales and marketing and $526,000 to general and administrative. For the second quarter of fiscal 2008 ending December 31, 2007, $2.1 million equity-based compensation expense was allocated as follows: $825,000 to research and development, $636,000 to sales and marketing and $621,000 to general and administrative. Management believes that it is useful to investors to understand how the expenses associated with the adoption of SFAS 123R are reflected in net income.
(b) This adjustment reflects the non-cash expense related to the amortization of intangibles acquired in connection with the acquisition of Chipidea included in operating expenses. For the second fiscal quarter ending December 31, 2008, $855,000 of amortization expense related to these intangible assets was allocated as follows: $794,000 to cost of sales, $7,000 to research and development and $54,000 to sales and marketing. For the first fiscal quarter ending September 30, 2008, $1.5 million of amortization expense related to these intangible assets was allocated as follows: $1.4 million to cost of sales, $8,000 to research and development and $62,000 to sales and marketing. For the second quarter of fiscal 2008 ending December 31, 2007, $2.2 million of amortization expense related to these intangible assets was allocated as follows: $2.2 million to cost of sales, $9,000 to research and development and $29,000 to sales and marketing. Management believes that excluding this charge facilitates comparisons to MIPS' ongoing operating results because the expense for the amortization of intangibles is not indicative of operational performance and the amount of such charges varies significantly based on the size and timing of our acquisitions and the maturity of the business being acquired.
(c) This adjustment reflects the amortization expense related to the amount held in escrow and payable to the founders of Chipidea in connection with the acquisition of Chipidea. For the second fiscal quarter ending December 31, 2007, this adjustment also reflects legal fees incurred in association with certain financing activities and the amortization of loan origination fees. For the second fiscal quarter ending December 31, 2008, $979,000 was expensed related to the escrow amount payable to the founders of Chipidea to research and development. For the first fiscal quarter ending September 30, 2008, $1.5 million was expensed related to the escrow amount payable to the founders of Chipidea and was allocated as follows: $429,000 to general and administrative and $1.1 million to research and development. For the second quarter of fiscal 2008 ending December 31, 2007, $1.7 million was expensed related to the escrow amount payable to the founders of Chipidea and was allocated as follows: $558,000 to general and administrative and $1.1 million to research and development. In addition, $464,000 was expensed related to the amortization of loan origination fees.
(d) This adjustment reflects integration expense related to the acquisition of Chipidea recorded in accounting and legal expense under general and administrative.
(e) This adjustment reflects acquired in-process research and development expense related to the acquisition of Chipidea.
(f) This adjustment reflects restructuring expense related to reduction in workforce and facilities exit costs.
(g) This adjustment reflects the net tax effect of the specific items presented in the non-GAAP adjustments described above.
MIPS TECHNOLOGIES, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME and NET INCOME PER SHARE
(In thousands, except per share data)
(unaudited)
Six Months Ended Six Months Ended
December 31, 2008 December 31, 2007
GAAP net income (loss) $(1,990) $(19,116)
Net income (loss) per basic share $(0.04) $(0.44)
Net income (loss) per diluted share $(0.04) $(0.44)
(h) Equity-based compensation expense
under SFAS 123R $2,473 $4,473
(i) Amortization of intangibles 2,370 3,202
(j) Acquisition related cost 2,524 3,451
(k) Integration cost - 2,119
(l) Acquired in-process research and
development - 6,350
(m) Restructuring 5,479 -
(n) Tax adjustment (819) 551
Non-GAAP net income $10,037 $1,030
Non-GAAP net income per basic share $0.23 $0.02
Non-GAAP net income per diluted share $0.22 $0.02
Common shares outstanding - basic 44,460 43,834
Common shares outstanding - diluted 44,770 46,209
