(a) This adjustment reflects the equity-based compensation expense related to SFAS No. 123 revised (SFAS 123R). For the third fiscal quarter ending March 31, 2009, $1.1 million of equity-based compensation was allocated as follows: $437,000 to research and development, $281,000 to sales and marketing and $367,000 to general and administrative. For the second fiscal quarter ending December 31, 2008, $1.3 million of equity-based compensation expense 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 third quarter of fiscal 2008 ending March 31, 2008, $1.8 million equity-based compensation expense was allocated as follows: $604,000 to research and development, $577,000 to sales and marketing and $618,000 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 third fiscal quarter ending March 31, 2009, $847,000 of amortization expense related to these intangible assets was allocated as follows: $786,000 to cost of sales, $7,000 to research and development and $54,000 to sales and marketing. 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 third quarter of fiscal 2008 ending March 31, 2008, $2.4 million of amortization related to these intangible assets was allocated as follows: $2.3 million to cost of sales, $8,000 to research and development and $126,000 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 third fiscal quarter ending March 31, 2009, $948,000 was expensed to research and development related to the escrow amount payable to the founders of Chipidea. 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 third quarter of fiscal 2008 ending March 31, 2008, $1.7 million was expensed related to the escrow amount payable to the founders of Chipidea and was allocated as follows: $567,000 to general and administrative and $1.1 million to research and development. In addition, $686,000 was expensed to other expenses 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 restructuring expense related to reduction in workforce and facilities exit costs.
(f) 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)
Nine Months Nine Months
Ended Ended
March 31, 2009 March 31, 2008
-------------- ---------------
GAAP net loss $(2,799) $(23,373)
Net loss per basic share, basic
and diluted $(0.06) $(0.53)
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(g) Equity-based compensation expense
under SFAS 123R $3,558 $6,272
(h) Amortization of intangibles 3,217 5,640
(i) Acquisition related cost 3,472 5,837
(j) Integration cost - 2,239
(k) Acquired in-process research and
development - 6,350
(l) Restructuring 6,438 1,279
(m) Tax adjustment (1,011) (1,390)
Non-GAAP net income $12,875 $2,854
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Non-GAAP net income per basic
share $0.29 $0.07
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Non-GAAP net income per diluted
share $0.29 $0.06
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Common shares outstanding - basic 44,534 43,887
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Common shares outstanding -
diluted 44,755 45,680
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