BROADCOM CORPORATION 
By IRVINE, Calif., Oct. 22, 2013 /PRNewswire/ --
Third Quarter 2013
Results GAAP Non-GAAP
---- --------
Total net revenue $2.15 billion
Net income per
share $0.55 $0.76
($0.15 better than ($0.07 better than
First Call consensus) First Call consensus)
--------------------- ---------------------
Broadcom Corporation (NASDAQ: BRCM), a global innovation leader in semiconductor solutions for wired and wireless communications, today reported unaudited financial results for its third quarter ended September 30, 2013.
"Broadcom delivered better-than-expected results across the board in the September quarter," said Scott McGregor, Broadcom's President and Chief Executive Officer. "With the Renesas transaction closed, the combined team is working diligently to deliver LTE revenue in early 2014. Looking forward, we are taking the necessary steps to tightly manage the business while focusing on strategic initiatives, including LTE, data center innovation and driving the next generation of home video with HEVC."
Net revenue for the third quarter of 2013 was $2.15 billion. This represents an increase of 2.7% compared with the $2.09 billion reported for the second quarter of 2013 and an increase of 0.8% compared with the $2.13 billion reported for the third quarter of 2012. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the third quarter of 2013 was $316 million, or $0.55 per share (diluted), compared with a GAAP net loss of $251 million, or $0.43 per share (basic and diluted), for the second quarter of 2013 and GAAP net income of $220 million, or $0.38 per share (diluted), for the third quarter of 2012.
During the quarter Broadcom initiated a global restructuring plan to reduce expenses and better align its resources to areas of strategic focus. The plan includes a workforce reduction of up to 1,150 employees (some of whom originated from the Renesas acquisition). In connection with the plan, Broadcom recorded restructuring costs of $12 million in the third quarter of 2013 and anticipates that it will record approximately $20 million in restructuring costs in the fourth quarter of 2013.
GAAP net income for the third quarter of 2013 included a one-time, non-recurring settlement gain of $75 million, a charitable contribution to the Broadcom Foundation of $25 million and restructuring costs of $12 million as discussed above, for a total positive impact to GAAP net income per share of $0.07. GAAP net income for the second quarter of 2013 included a purchased intangible impairment charge of $501 million, or $.87 per share, which was primarily related to Broadcom's acquisition of NetLogic Microsystems, Inc.
In addition to GAAP results, Broadcom reports adjusted net income and adjusted net income per share, referred to respectively as "non-GAAP net income" and "non-GAAP diluted net income per share." A discussion of Broadcom's use of these and other non-GAAP financial measures is set forth below. Reconciliations of GAAP to non-GAAP financial measures for the three months ended September 30, 2013, June 30, 2013 and September 30, 2012, respectively, and the nine months ended September 30, 2013 and 2012 appear in the financial statements portion of this release under the heading "Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments."
Non-GAAP net income for the third quarter of 2013 was $460 million, or $0.76 per share (diluted), compared with non-GAAP net income of $436 million, or $0.70 per share (diluted), for the second quarter of 2013 and non-GAAP net income of $476 million, or $0.79 per share (diluted), for the third quarter of 2012.
Conference Call Information
As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its third quarter 2013 financial results and current financial prospects today at 1:45 p.m. Pacific Time (4:45 p.m. Eastern Time). The company will broadcast the conference call via webcast over the Internet. To listen to the webcast, or to view the financial and other statistical information required by Securities and Exchange Commission (SEC) Regulation G, please visit the Investors section of the Broadcom website at www.broadcom.com/investors. The webcast will be recorded and available for replay until 11:59 p.m. Pacific Time on Saturday, November 23, 2013.
The financial results included in this release are unaudited. The audited financial statements of the company for the year ended December 31, 2012 are included in Broadcom's Annual Report on Form 10-K, filed with the SEC on January 30, 2013.
About Broadcom
Broadcom Corporation (NASDAQ: BRCM), a FORTUNE 500(®) company, is a global leader and innovator in semiconductor solutions for wired and wireless communications. Broadcom(®) products seamlessly deliver voice, video, data and multimedia connectivity in the home, office and mobile environments. With the industry's broadest portfolio of state-of-the-art system-on-a-chip and embedded software solutions, Broadcom is changing the world by Connecting everything(®). For more information, go to www.broadcom.com.
Note Regarding Use of Non-GAAP Financial Measures
Broadcom reports the following measures in accordance with GAAP and on a non-GAAP basis: (i) cost of product revenue, (ii) product gross profit, (iii) product gross margin, (iv) research and development and selling, general and administrative expense, (v) net income (loss), (vi) weighted average shares outstanding (diluted) and (vii) diluted net income (loss) per share (EPS). Broadcom's presentation of non-GAAP cost of product revenue, non-GAAP product gross profit, and non-GAAP product gross margin excludes certain charges related to acquisitions, stock-based compensation expense and employer payroll tax expense on certain equity awards. Acquisition-related charges include the amortization of purchased intangible assets and the amortization of acquired inventory valuation step-up. Our non-GAAP research and development and selling, general and administrative expense excludes stock-based compensation expense and employer payroll tax expense on certain equity awards. In addition to the exclusions noted above, our non-GAAP net income and diluted net income per share also exclude impairment of long-lived assets, settlement costs (gains), restructuring costs (reversals), charitable contributions, gains on strategic investments, tax benefits resulting from reductions in our U.S. valuation allowance on certain deferred tax assets due to the recording of net deferred tax liabilities for identifiable intangible assets under purchase accounting, and tax benefits resulting from the reduction of certain foreign deferred tax liabilities due to the impairment of long-lived assets. Stock-based compensation expense primarily includes the impact of stock options and restricted stock units issued by Broadcom. Reconciliations of our GAAP to non-GAAP financial measures for the three months ended September 30, 2013, June 30, 2013 and September 30, 2012, respectively, and nine months ended September 30, 2013 and 2012 appear in the financial statements portion of this release under the heading "Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments." Certain amounts previously reported as licensing revenue have been reclassified to product revenue to conform to the current period presentation. Some totals or amounts may not add or conform to prior period presentations due to rounding.
Broadcom believes that the presentation of these non-GAAP measures provides important supplemental information to management and investors regarding financial and business trends relating to our financial condition and results of operations. Broadcom's management believes that the use of these non-GAAP financial measures provides consistency and comparability among and between results from prior periods or forecasts and future prospects, and also facilitates comparisons with other companies in our industry, many of which use similar non-GAAP financial measures to supplement their GAAP results. Broadcom's management has historically used these non-GAAP financial measures when evaluating operating performance, because we believe that the inclusion or exclusion of the items described above provides insight into our core operating results, our ability to generate cash and underlying business trends affecting our performance. Broadcom has chosen to provide this information to investors to enable them to perform additional analysis of past, present and future operating performance and as a supplemental means to evaluate our ongoing core operations. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
For additional information on the items excluded by Broadcom from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the SEC.
Cautions Regarding Forward-Looking Statements:
All statements included or incorporated by reference in this release and the related conference call for analysts and investors, other than statements or characterizations of historical fact, are forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, estimates and projections about our business and industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. Examples of such forward-looking statements include, but are not limited to, guidance provided on future revenue, product gross margin and operating expenses for the fourth quarter of 2013 (on both a GAAP and non-GAAP basis), references to LTE revenue in early 2014, and the success of our strategic initiatives. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.
These risks and uncertainties include, but are not limited to the following:
-- Our quarterly operating results may fluctuate significantly.
-- We depend on a few significant customers for a substantial portion of
our revenue.
-- We face intense competition.
-- We manufacture and sell complex products and may be unable to
successfully develop and introduce new products.
-- We face risks associated with our acquisition strategy.
-- We may fail to appropriately adjust our operations in response to
changes in our strategy or market demand.
-- We are exposed to risks associated with our international operations.
-- Our operating results may be adversely impacted by worldwide economic
uncertainties and specific conditions in the markets we address.
-- Our business is subject to potential tax liabilities.
-- Our stock price is highly volatile.
-- We may be required to defend against alleged infringement of
intellectual property rights of others and/or may be unable to
adequately protect or enforce our own intellectual property rights.
-- We may be unable to attract, retain or motivate key personnel.
-- We are subject to order and shipment uncertainties.
-- We depend on third parties to fabricate, assemble and test our products.
-- Our systems are subject to security breaches and other cybersecurity
incidents.
-- Government regulation may adversely affect our business.
-- Our articles of incorporation and bylaws contain anti-takeover
provisions.
-- There can be no assurance that we will continue to declare cash
dividends.
-- Our co-founders and their affiliates may strongly influence the outcome
of matters that require the approval of our shareholders.
Our Annual Report on Form 10-K for the year ended December 31, 2012, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other SEC filings, discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. The forward-looking statements used in this release and the related conference call for analysts and investors speak only as of the date they are made. We undertake no obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances.
Broadcom(®), the pulse logo, Connecting everything(®), and the Connecting everything logo are among the trademarks of Broadcom Corporation and/or its affiliates in the United States, certain other countries and/or the EU. Any other trademarks or trade names mentioned are the property of their respective owners.
BROADCOM CORPORATION
Unaudited GAAP Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
Three Months Ended Nine Months
Ended
------------------ -----------
September June September September
30, 30, 30, 30,
---------- ----- ---------- ----------
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
Net revenue:
Product
revenue $2,146 $2,047 $2,085 $6,155 $5,783
Income from
Qualcomm
Agreement - 43 43 86 143
--- --- --- --- ---
Total net
revenue 2,146 2,090 2,128 6,241 5,926
Costs and expenses:
Cost of
product
revenue 1,044 1,030 1,063 3,062 3,002
Research and
development 609 619 600 1,843 1,728
Selling,
general and
administrative 181 174 174 534 524
Amortization
of purchased
intangible
assets 14 14 32 43 82
Impairments
of long-
lived
assets - 501 48 511 85
Restructuring
costs 12 - 2 12 6
Settlement
costs
(gains) (75) - (2) (75) 86
Charitable
contribution 25 - - 25 -
--- --- --- --- ---
Total
operating
costs and
expenses 1,810 2,338 1,917 5,955 5,513
----- ----- ----- ----- -----
Income
(loss) from
operations 336 (248) 211 286 413
Interest
expense,
net (7) (9) (8) (24) (21)
Other income
(expense),
net (4) 3 8 2 14
--- --- --- --- ---
Income
(loss)
before
income
taxes 325 (254) 211 264 406
Provision
for
(benefit
of) income
taxes 9 (3) (9) 8 (62)
--- --- --- --- ---
Net income
(loss) $316 $(251) $220 $256 $468
==== ===== ==== ==== ====
Net income
(loss) per
share
(basic) $0.55 $(0.43) $0.39 $0.45 $0.84
===== ===== ===== ===== =====
Net income
(loss) per
share
(diluted) $0.55 $(0.43) $0.38 $0.44 $0.82
===== ===== ===== ===== =====
Weighted
average
shares
(basic) 571 578 561 573 555
=== === === === ===
Weighted
average
shares
(diluted) 578 578 579 585 574
=== === === === ===
Dividends
per share $0.11 $0.11 $0.10 $0.33 $0.30
===== ===== ===== ===== =====
The following table presents details of total stock-based compensation expense included in each functional line item in the unaudited condensed consolidated statements of income above:
Three Months Ended Nine
Months
Ended
------------------ -------
September June September September
30, 30, 30, 30,
---------- ---- ---------- ----------
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
Cost of
product
revenue $6 $6 $6 $19 $21
Research and
development 86 95 89 280 278
Selling,
general and
administrative 33 35 33 102 116
BROADCOM CORPORATION
Unaudited Condensed Consolidated Statements of Cash Flows
(In millions)
Three Months Ended Nine Months
Ended
------------------ ------------
September June September September
30, 30, 30, 30,
---------- ----- ---------- ----------
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
Operating activities
Net income
(loss) $316 $(251) $220 $256 $468
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation
and
amortization 44 39 38 122 95
Stock-based
compensation
expense 125 136 128 401 415
Acquisition-related
items:
Amortization
of purchased
intangible
assets 56 58 87 172 230
Impairments
of long-
lived
assets - 501 48 511 85
Gain on
strategic
investments
and other (1) (1) (9) (2) (12)
Changes in operating
assets and
liabilities, net of
acquisitions:
Accounts
receivable (91) (10) (42) (112) (140)
Inventory 69 (87) (28) (14) (35)
Prepaid
expenses
and other
assets 30 7 2 3 (8)
Accounts
payable (112) (17) (26) (20) 125
Deferred
revenue and
income (2) (7) 53 (11) 39
Accrued
settlement
costs 3 (38) - (38) 51
Other
accrued and
long-term
liabilities 235 4 150 126 25
--- --- --- ---
Net cash
provided by
operating
activities 672 334 621 1,394 1,338
--- --- --- ----- -----
Investing activities
Net
purchases
of property
and
equipment (64) (67) (65) (172) (189)
Net cash
paid for
acquired
companies - - (10) - (3,582)
Sales of
strategic
investments - - 10 - 13
Purchases of
marketable
securities (678) (917) (1,140) (2,214) (1,854)
Proceeds
from sales
and
maturities
of
marketable
securities 391 566 187 1,496 1,192
--- --- ----- -----
Net cash
used in
investing
activities (351) (418) (1,018) (890) (4,420)
---- ---- ------ ---- ------
Financing activities
Issuance of
long-term
debt, net - - 492 - 492
Repurchases
of Class A
common
stock (378) (110) (1) (595) (1)
Dividends
paid (63) (64) (56) (190) (167)
Payment of
assumed
contingent
consideration
and debt - - (4) - (57)
Proceeds
from
issuance of
common
stock 25 199 53 292 209
Minimum tax
withholding
paid on
behalf of
employees
for
restricted
stock units (26) (38) (33) (104) (124)
--- --- ---- ----
Net cash
provided by
(used in)
financing
activities (442) (13) 451 (597) 352
---- --- --- ---- ---
Income
(decrease)
in cash and
cash
equivalents (121) (97) 54 (93) (2,730)
Cash and
cash
equivalents
at
beginning
of period 1,645 1,742 1,362 1,617 4,146
----- ----- ----- -----
Cash and
cash
equivalents
at end of
period $1,524 $1,645 $1,416 $1,524 $1,416
====== ==== ====== ====== ======
BROADCOM CORPORATION
Unaudited Condensed Consolidated Balance Sheets
(In millions)
September December
30, 31,
2013 2012
---- ----
ASSETS
Current assets:
Cash and cash equivalents $1,524 $1,617
Short-term marketable securities 880 757
Accounts receivable, net 852 740
Inventory 541 527
Prepaid expenses and other current
assets 130 140
--- ---
Total current assets 3,927 3,781
Property and equipment, net 535 485
Long-term marketable securities 1,940 1,348
Goodwill 3,743 3,726
Purchased intangible assets, net 1,112 1,786
Other assets 88 82
--- ---
Total assets $11,345 $11,208
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $300 $300
Accounts payable 520 549
Wages and related benefits 219 241
Deferred revenue and income 22 22
Accrued liabilities 740 570
--- ---
Total current liabilities 1,801 1,682
Long-term debt 1,394 1,393
Other long-term liabilities 233 294
Commitments and contingencies
Shareholders' equity 7,917 7,839
----- -----
Total liabilities and
shareholders' equity $11,345 $11,208
======= =======
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
(In millions)
September June 30, December
30, 31,
2013 2013 2012
---- ---- ----
Cash
and
cash
equivalents $1,524 $1,645 $1,617
Short-
term
marketable
securities 880 836 757
Long-
term
marketable
securities 1,940 1,696 1,348
Total
cash,
cash
equivalents
and
marketable
securities $4,344 $4,177 $3,722
====== ====== ======
Increase
from
prior
period
end $167
====
Increase
from
prior
year
end $622
====
BROADCOM CORPORATION
Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments
(In millions)
Three Months Ended Nine Months
Ended
------------------ ------------
September June September
30, 30, 30, September 30,
---------- ----- ---------- -------------
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
Product
revenue $2,146 $2,047 $2,085 $6,155 $5,783
GAAP cost of
product
revenue 1,044 1,030 1,063 3,062 3,002
GAAP product
gross
profit $1,102 $1,017 $1,022 $3,093 $2,781
====== ==== ====== ==== ====
GAAP product
gross
margin 51.4% 49.7% 49.0% 50.3% 48.1%
GAAP cost of
product
revenue $1,044 $1,030 $1,063 $3,062 $3,002
Adjustments:
Stock-based
compensation
and related
payroll
taxes (6) (6) (6) (19) (21)
Amortization
of purchased
intangible
assets and
step-up of
acquired
inventory (42) (44) (62) (130) (220)
Non-GAAP
cost of
product
revenue $996 $980 $995 $2,913 $2,761
==== ==== ==== ==== ====
Product
revenue $2,146 $2,047 $2,085 $6,155 $5,783
Non-GAAP
cost of
product
revenue 996 980 995 2,913 2,761
Non-GAAP
product
gross
profit $1,150 $1,067 $1,090 $3,242 $3,022
====== ==== ====== ==== ====
Non-GAAP
product
gross
margin 53.6% 52.1% 52.3% 52.7% 52.3%
GAAP
research
and
development
and
selling,
general and
administrative
expense $790 $793 $774 $2,377 $2,252
Adjustments:
Stock-based
compensation
and related
payroll
taxes (120) (131) (126) (386) (402)
---- ---- ---- ---- ----
Non-GAAP
research
and
development
and
selling,
general and
administrative
expense $670 $662 $648 $1,991 $1,850
==== ==== ==== ==== ====
BROADCOM CORPORATION
Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments
(In millions)
Three Months Ended Nine Months
Ended
------------------ -----------
September June September September
30, 30, 30, 30,
---------- ----- ---------- ----------
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
GAAP net
income
(loss) $316 $(251) $220 $256 $468
Adjustments:
Stock-based
compensation
and related
payroll
taxes 126 137 132 405 423
Amortization
of purchased
intangible
assets and
step-up of
acquired
inventory 56 58 94 173 302
Impairment
of long-
lived
assets - 501 48 511 85
Settlement
costs
(gains) (75) - (2) (75) 86
Charitable
contributions 25 - - 25 -
Restructuring
costs 12 - 2 12 6
Other
income, net - (1) (6) (1) (9)
Certain
income tax
benefit - (8) (12) (10) (63)
Total GAAP
to Non-
GAAP
adjustments 144 687 256 1,040 830
--- --- --- ----- ---
Non-GAAP
net income $460 $436 $476 $1,296 $1,298
==== ==== ==== ==== ====
Shares used
in
calculation
-diluted
(GAAP) 578 578 579 585 574
Non-GAAP
adjustment
* 27 44 26 29 27
Shares used
in
calculation
- diluted
(Non-GAAP) 605 622 605 614 601
=== === === === ===
GAAP diluted
net income
(loss) per
share $0.55 $(0.43) $0.38 $0.44 $0.82
Non-GAAP
diluted net
income per
share $0.76 $0.70 $0.79 $2.11 $2.16
===== ===== ===== ===== =====
*Represents the benefits of
compensation costs
attributable to future
services and not yet
recognized in the financial
statements that are treated
as proceeds assumed to be
used to repurchase shares
under the GAAP treasury
stock method. In the three
months ended June 30, 2013
the amount also includes
dilutive securities that
were excluded from GAAP
diluted loss per share as
they had an anti-dilutive
impact as a result of the
net loss position.
BROADCOM CORPORATION
Guidance for the Three Months Ending December 31,
2013
Three Months Ending
December 31, 2013
-----------------
Total net revenue ~$1.975 billion plus or
minus 3%
----------------- ------------------------
Product gross margin (GAAP Down ~50 to 100 basis
and Non-GAAP) points from Q3'13
-------------------------- ----------------------
Research & development and Up ~$40 million to $60
selling, general, and million from Q3'13
administrative expenses
(GAAP)
-------------------------- -----------------------
Research & development and Up ~$40 million to $60
selling, general, and million from Q3'13
administrative expenses
(Non-GAAP)
-------------------------- -----------------------
Broadcom has based the preceding guidance for the three months ending December 31, 2013 on expectations, assumptions and estimates that we believe are reasonable given our assessment of historical trends and other information reasonably available as of October 22, 2013. Our guidance consists of predictions only, however, and is subject to a wide range of known and unknown business risks and uncertainties, many of which are beyond our control. The forecasts and projections contained in the table above should not be regarded as representations by Broadcom that the estimated results will be achieved. Projections and estimates are necessarily speculative in nature and actual results may vary materially from the guidance we provide today. The non-GAAP guidance presented above is consistent with the presentation of non-GAAP results included elsewhere herein.
The guidance set forth in the above table should be read together with the information under the caption, "Cautions Regarding Forward-Looking Statements" above, our Annual Report on Form 10-K for the year ended December 31, 2012, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and our other SEC filings. We undertake no obligation to publicly update or revise any forward-looking statements, including the guidance set forth herein, to reflect future events or circumstances.
Broadcom Business Press Contact Broadcom Investor Relations Contact
Karen Kahn Chris Zegarelli
Vice President, Corporate
Communications Senior Director, Investor Relations
415-297-5035 949-926-7567
kkahn@broadcom.com czegarel@broadcom.com
SOURCE Broadcom Corporation; BRCM Corporate
