SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 29, 2015
BROADCOM CORPORATION
(Exact Name of Registrant as Specified in Charter)
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California | 000-23993 | 33-0480482 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
5300 California Avenue, Irvine, CA 92617
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code: (949) 926-5000
Not Applicable
(Former Name or Former Address, if Changed since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
The information in Item 2.02 of this Current Report, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, regardless of any general incorporation language contained in such filing.
On January 29, 2015, Broadcom Corporation (the “Company” or “Broadcom”) issued a press release announcing unaudited financial results for the three and twelve months ended December 31, 2014. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated by reference herein.
Discussion of Non-GAAP Financial Measures
Broadcom reports the following measures in accordance with U.S. Generally Accepted Accounting Principles, or GAAP and on a non-GAAP basis: (i) cost of revenue, (ii) gross profit, (iii) gross margin, (iv) net income, and (v) diluted net income per share, referred to collectively as “non-GAAP financial measures.” These non-GAAP financial measures exclude certain charges related to acquisitions and non-recurring, infrequent or unusual charges and gains that are driven primarily by discrete events that management does not consider to be directly related to the Company’s core operating performance. Non-GAAP net income per share is calculated by dividing non-GAAP net income by weighted average shares outstanding (diluted).
Broadcom believes that the presentation of these non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s 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 the Company’s 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 Broadcom believes that the inclusion or exclusion of the items described below provides insight into its core operating results, its ability to generate cash and underlying business trends affecting 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 the Company’s ongoing core operations. Externally, Broadcom believes that these non-GAAP financial measures, when used in conjunction with the Company’s GAAP financial information, is useful to investors in their assessment of Broadcom’s operating performance and the valuation of the Company.
Internally, these non-GAAP financial measures are significant measures used by management for purposes of:
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• | supplementing the financial results and forecasts reported to the Company’s board of directors; |
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• | evaluating Broadcom’s operating performance; |
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• | managing and benchmarking performance internally across Broadcom’s businesses and externally against peers; |
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• | determining a portion of bonus compensation for executive officers and certain other key employees; |
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• | establishing internal operating budgets; |
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• | calculating return on investment for development programs and growth initiatives; |
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• | comparing performance with internal forecasts and targeted business models; and |
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• | evaluating and valuing potential acquisition candidates. |
These Non-GAAP financial measures are adjusted for one or more of the following items:
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• | Acquisition-related charges. Acquisition-related charges include the amortization of purchased intangible assets and the amortization of acquired inventory valuation step-up (as well as the impairment of goodwill and purchased intangible assets primarily consisting of developed technology and in-process research and development assets). These charges are not factored into management’s evaluation of potential acquisitions, or of the Company’s performance after completion of acquisitions, because they do not affect the Company’s current cash position, are not related to core operating performance and had Broadcom internally developed the technology acquired, the amortization of intangible assets would have been expensed in prior periods. In addition, the frequency and amount of such charges vary significantly based on the timing and magnitude of the |
Company’s acquisition transactions, the maturities of the businesses being acquired, and depending on the nature of the consideration paid in connection with acquisitions, the then fair market value of Broadcom’s Class A common stock.
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• | Other charges and gains. Other charges and gains consist of impairment of other long-lived assets, settlement costs (gains), restructuring costs (reversals), charitable contributions, gains on sale of assets and gains (losses) on strategic investments and certain inventory charges relating to our decision to exit our cellular baseband business, all of which occur on a sporadic basis and vary greatly in amount. Management excludes these items when evaluating the Company’s operating performance because these amounts do not affect core operations and because the frequency and variability in the nature of the charges can vary significantly from period to period. Excluding this data provides investors with a basis to compare the Company’s performance against the performance of other companies without this variability. |
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• | Income tax expense (benefit). Represents the reversal of a portion of our valuation allowance that was directly related to the establishment of a deferred tax liability associated with the step-up of acquired identifiable intangible assets allocated to jurisdictions in which the statutory tax rate is above zero, as well as tax benefits resulting from the reduction of certain foreign deferred tax liabilities due to the impairment of long-lived assets. |
Additionally, for transitional purposes Broadcom has included non-GAAP net income and non-GAAP diluted net income per share for the current periods reported excluding stock-based compensation. In future releases reporting its financial results, Broadcom will now provide those metrics calculated with the inclusion of stock-based compensation, as the Company now sets financial targets for its reportable segments that include stock-based compensation expense.
Non-GAAP financial measures are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of Broadcom’s business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of Broadcom’s results as reported under GAAP. Broadcom expects to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from Broadcom’s non-GAAP financial measures should not be construed as an inference that these costs are unusual, infrequent or non-recurring. Some of the limitations in relying on non-GAAP financial measures are:
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• | Although amortization and impairment of purchased intangible assets do not directly affect the Company’s current cash position, such expense represents the declining value of the technology and other intangible assets that were acquired. These assets are amortized over their respective expected economic lives or impaired, when appropriate. The expense associated with this decline in value is excluded from these non-GAAP financial measures, and therefore these non-GAAP financial measures do not reflect the costs of acquired intangible assets that supplement the Company’s research and development efforts. |
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• | Broadcom periodically acquires and assimilates other companies or businesses, and expects to continue to experience acquisition-related charges in the future. Broadcom also periodically enters into settlement agreements in connection with various litigation matters. These costs can directly impact the amount of available funds or could be dilutive to shareholders in the future. |
Item 9.01 Financial Statements and Exhibits.
99.1 — Press Release dated January 29, 2015 of the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| BROADCOM CORPORATION, |
| a California corporation |
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January 29, 2015 | By: | /s/ Eric K. Brandt |
| | Eric K. Brandt |
| | Executive Vice President and |
| | Chief Financial Officer |
Broadcom Reports Fourth Quarter and Full Year 2014 Results
IRVINE, Calif. – January 29, 2015 –
- Record 2014 Net Revenue: $8.43 billion -
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Fourth Quarter 2014 Results | | GAAP | | Non-GAAP (including SBC) | | Non-GAAP (excluding SBC) |
Net revenue | | $2.14 billion | | | | |
Net income per share | | $.64 | | $.76 | | $.90 |
| | | | (including $0.14 of stock-based compensation) | | ($0.03 better than 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 fourth quarter and year ended December 31, 2014.
"Better than anticipated revenue produced operating results above consensus for the quarter, driven by stronger Broadband and Connectivity revenue in the high-end smartphone and broadband access markets,” said Scott McGregor, Broadcom's President and Chief Executive Officer. “2014 was a pivotal year where we focused on our core businesses, delivered record revenue and non-GAAP profitability, increased capital return and enhanced corporate governance.”
Net revenue for the fourth quarter of 2014 was $2.14 billion. This represents a decrease of 5.2% compared with the $2.26 billion reported for the third quarter of 2014 and an increase of 3.8% compared with the $2.06 billion reported for the fourth quarter of 2013. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the fourth quarter of 2014 was $390 million, or $0.64 per share (diluted), compared with GAAP net income of $98 million, or $0.16 per share (diluted), for the third quarter of 2014 and GAAP net income of $168 million, or $0.29 per share (diluted), for the fourth quarter of 2013.
Net revenue for the year ended December 31, 2014 was $8.43 billion. This represents an increase in net revenue of 1.5% from the $8.31 billion reported for the year ended December 31, 2013. Net income computed in accordance with GAAP for the year ended December 31, 2014 was $652 million, or $1.08 per share (diluted), compared with GAAP net income of $424 million, or $0.73 per share (diluted), for the year ended December 31, 2013.
GAAP net income for the fourth quarter of 2014 included charges for restructuring costs and the impairment of long-lived assets, primarily related to Broadcom's decision to exit its cellular baseband business, of $30 million, or $0.05 per share.
GAAP net income for the third quarter of 2014 included charges for restructuring costs related to Broadcom's decision to exit the cellular baseband business totaling $114 million, or $0.19 per share, and additional charges for the impairment of purchased intangible assets of $200 million, or $0.33 per share.
GAAP net income for 2014 included (i) impairment charges for long-lived assets, restructuring costs and an inventory write-down primarily related to Broadcom's decision to exit the cellular baseband business totaling $329 million, or $0.55 per share; (ii) additional charges for the impairment of purchased intangible assets of $260 million, or $0.43 per share; (iii) settlements costs of $16 million, or $0.03 per share; and (iv) a net gain on sale of assets $60 million, or $0.10 per share.
GAAP net income for 2013 included (i) impairment charges for purchased intangible assets of $511 million, or $0.88 per share, which was primarily related to Broadcom's acquisition of NetLogic Microsystems, Inc.; (ii) restructuring costs of $29 million, or $0.05 per share; (iii) a charitable contribution to Broadcom Foundation of $25 million, or $0.04 per share; and (iv) net settlement gains of $69 million, or $0.12 per share.
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.” Beginning with the fourth quarter of 2014, Broadcom is reporting (and plans to report in the future) non-GAAP results calculated with the inclusion of stock-based compensation. All prior-period amounts have been adjusted retrospectively to reflect this change. For transitional purposes, Broadcom is also providing, for the periods reported in this release only, non-GAAP net income and non-GAAP diluted net income per share excluding stock-based compensation. 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 December 31, 2014, September 30, 2014 and December 31, 2013, and the year ended December 31, 2014 and 2013 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 fourth quarter of 2014 was $463 million, or $0.76 per share (diluted), compared with non-GAAP net income of $461 million, or $0.76 per share (diluted), for the third quarter of 2014 and non-GAAP net income of $247 million, or $0.43 per share (diluted), for the fourth quarter of 2013. Non-GAAP net income for the year ended December 31, 2014 was $1.41 billion, or $2.35 per share (diluted), compared with non-GAAP net income of $1.14 billion, or $1.95 per share (diluted), for the year ended December 31, 2013.
Conference Call Information
As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its fourth quarter and full year 2014 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 Sunday, February 22, 2015.
The financial results included in this release are unaudited. The audited financial statements of the company for the year ended December 31, 2014 are included in Broadcom’s Annual Report on Form 10-K, filed with the SEC as soon as practicable.
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 one of the industry’s broadest portfolio of state-of-the-art system-on-a-chip 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 revenue, (ii) gross profit, (iii) gross margin, (iv) net income (loss), and (v) diluted net income (loss) per share (EPS). Broadcom's non-GAAP cost of revenue, non-GAAP gross profit, and non-GAAP gross margin excludes certain charges related to acquisitions and certain inventory charges relating to its decision to exit the cellular baseband business. Acquisition-related charges include the amortization of purchased intangible assets and the amortization of acquired inventory valuation step-up. In addition to the exclusions noted above, Broadcom's 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, gain on sale of assets, gains (losses) on strategic investments, other charges (gains), tax benefits resulting from reductions in 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. Reconciliations of GAAP to non-GAAP financial measures for the three
months ended December 31, 2014, September 30, 2014 and December 31, 2013, respectively, and the year ended December 31, 2014 and 2013 appear in the financial statements portion of this release under the heading “Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments.” Some totals or amounts may not add or conform to prior period presentations due to rounding.
Additionally, as noted above, for the periods reported herein only, Broadcom has included non-GAAP net income and non-GAAP diluted net income per share excluding stock-based compensation. In future releases reporting its financial results, Broadcom will now provide those metrics calculated with the inclusion of stock-based compensation, as Broadcom now sets financial targets for its reportable segments that include stock-based compensation expense.
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 its 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 its 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 they believe that the inclusion or exclusion of the items described above provides insight into core operating results, the ability to generate cash and underlying business trends affecting 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 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 first quarter of 2015 (on both a GAAP and non-GAAP basis). 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:
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• | Our quarterly operating results may fluctuate significantly. |
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• | We depend on a few significant customers for a substantial portion of our revenue. |
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• | We may fail to appropriately adjust our operations in response to changes in our strategy or market demand. |
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• | We face intense competition. |
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• | We manufacture and sell complex products and may be unable to successfully develop and introduce new products. |
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• | We are exposed to risks associated with our international operations. |
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• | Our operating results may be adversely impacted by worldwide economic uncertainties and specific conditions in the markets we address. |
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• | We may be unable to attract, retain or motivate key personnel. |
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• | Our stock price is highly volatile. |
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• | Our business is subject to potential tax liabilities. |
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• | 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. |
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• | We face risks associated with our acquisition strategy. |
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• | We are subject to order and shipment uncertainties. |
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• | We depend on third parties to fabricate, assemble and test our products. |
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• | Our systems are subject to security breaches and other cybersecurity incidents. |
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• | Government regulation may adversely affect our business. |
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• | Our future ability to return capital to shareholders in the form of dividends or share repurchases may be impacted by the availability of U.S. cash. |
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• | Our articles of incorporation and bylaws contain anti-takeover provisions. |
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• | 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, 2013, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2014 when it is filed, 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.
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BROADCOM CORPORATION |
Unaudited GAAP Condensed Consolidated Statements of Operations |
(In millions, except per share amounts) |
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| Three Months Ended | | Year Ended |
| December 31, | | September 30, | | December 31, | | December 31, |
| 2014 | | 2014 | | 2013 | | 2014 | | 2013 |
Net revenue | $ | 2,143 |
| | $ | 2,260 |
| | $ | 2,064 |
| | $ | 8,428 |
| | $ | 8,305 |
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Cost of revenue | 1,012 |
| | 1,077 |
| | 1,026 |
| | 4,098 |
| | 4,088 |
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Gross profit | 1,131 |
| | 1,183 |
| | 1,038 |
| | 4,330 |
| | 4,217 |
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Operating expenses: | | | | | | | | | |
Research and development | 530 |
| | 573 |
| | 643 |
| | 2,373 |
| | 2,486 |
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Selling, general and administrative | 173 |
| | 176 |
| | 172 |
| | 716 |
| | 706 |
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Amortization of purchased intangible assets | 3 |
| | 8 |
| | 14 |
| | 29 |
| | 57 |
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Impairments of long-lived assets | 14 |
| | 200 |
| | — |
| | 404 |
| | 511 |
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Restructuring costs, net | 16 |
| | 114 |
| | 17 |
| | 158 |
| | 29 |
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Settlement costs (gains) | (4 | ) | | 2 |
| | 6 |
| | 16 |
| | (69 | ) |
Other charges (gains), net | — |
| | (1 | ) | | — |
| | (60 | ) | | 25 |
|
Total operating expenses | 732 |
| | 1,072 |
| | 852 |
| | 3,636 |
| | 3,745 |
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Income from operations | 399 |
| | 111 |
| | 186 |
| | 694 |
| | 472 |
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Interest expense, net | (9 | ) | | (17 | ) | | (6 | ) | | (36 | ) | | (30 | ) |
Other income, net | 5 |
| | 9 |
| | 1 |
| | 9 |
| | 3 |
|
Income before income taxes | 395 |
| | 103 |
| | 181 |
| | 667 |
| | 445 |
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Provision for income taxes
| 5 |
| | 5 |
| | 13 |
| | 15 |
| | 21 |
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Net income | $ | 390 |
| | $ | 98 |
| | $ | 168 |
| | $ | 652 |
| | $ | 424 |
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Net income per share (basic) | $ | 0.65 |
| | $ | 0.17 |
| | $ | 0.29 |
| | $ | 1.11 |
| | $ | 0.74 |
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Net income per share (diluted) | $ | 0.64 |
| | $ | 0.16 |
| | $ | 0.29 |
| | $ | 1.08 |
| | $ | 0.73 |
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Weighted average shares (basic) | 596 |
| | 591 |
| | 576 |
| | 590 |
| | 574 |
|
Weighted average shares (diluted) | 610 |
| | 607 |
| | 581 |
| | 601 |
| | 584 |
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Dividends per share | $ | 0.12 |
| | $ | 0.12 |
| | $ | 0.11 |
| | $ | 0.48 |
| | $ | 0.44 |
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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:
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| Three Months Ended | | Year Ended |
| December 31, | | September 30, | | December 31, | | December 31, |
| 2014 | | 2014 | | 2013 | | 2014 | | 2013 |
Cost of revenue | $ | 5 |
| | $ | 6 |
| | $ | 6 |
| | $ | 22 |
| | $ | 25 |
|
Research and development | 67 |
| | 73 |
| | 83 |
| | 304 |
| | 363 |
|
Selling, general and administrative | 25 |
| | 28 |
| | 28 |
| | 111 |
| | 130 |
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BROADCOM CORPORATION |
Unaudited Condensed Consolidated Statements of Cash Flows |
(In millions) |
| | | | | | | | | |
| Three Months Ended | | Year Ended |
| December 31, | | September 30, | | December 31, | | December 31, |
| 2014 | | 2014 | | 2013 | | 2014 | | 2013 |
Operating activities | | | | | | | | | |
Net income | $ | 390 |
| | $ | 98 |
| | $ | 168 |
| | $ | 652 |
| | $ | 424 |
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Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | |
Depreciation and amortization | 37 |
| | 42 |
| | 51 |
| | 178 |
| | 173 |
|
Stock-based compensation expense | 97 |
| | 107 |
| | 117 |
| | 437 |
| | 518 |
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Acquisition-related items: | | | | | | | | | |
Amortization of purchased intangible assets | 45 |
| | 54 |
| | 56 |
| | 214 |
| | 228 |
|
Impairments of long-lived assets | 14 |
| | 200 |
| | — |
| | 404 |
| | 511 |
|
Loss (gain) on sale of assets and other | 3 |
| | 3 |
| | — |
| | (41 | ) | | (2 | ) |
Changes in operating assets and liabilities, net of acquisitions: | | | | | | | | | |
Accounts receivable, net | 134 |
| | (142 | ) | | 57 |
| | (9 | ) | | (55 | ) |
Inventory | 93 |
| | (10 | ) | | 16 |
| | (7 | ) | | 2 |
|
Prepaid expenses and other assets | 7 |
| | 11 |
| | (28 | ) | | 14 |
| | (25 | ) |
Accounts payable | (176 | ) | | — |
| | 44 |
| | (79 | ) | | 24 |
|
Deferred revenue | (11 | ) | | (7 | ) | | (4 | ) | | 87 |
| | (15 | ) |
Other accrued and long-term liabilities | — |
| | 105 |
| | (86 | ) | | 75 |
| | 2 |
|
Net cash provided by operating activities | 633 |
| | 461 |
| | 391 |
| | 1,925 |
| | 1,785 |
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Investing activities | | | | | | | | | |
Net purchases of property and equipment | (48 | ) | | (56 | ) | | (56 | ) | | (262 | ) | | (228 | ) |
Net cash paid for acquired companies | (5 | ) | | (3 | ) | | (142 | ) | | (14 | ) | | (142 | ) |
Proceeds from sale of certain assets and other | 2 |
| | — |
| | (15 | ) | | 92 |
| | (15 | ) |
Purchases of marketable securities | (2,003 | ) | | (955 | ) | | (468 | ) | | (3,871 | ) | | (2,682 | ) |
Proceeds from sales and maturities of marketable securities | 1,724 |
| | 447 |
| | 575 |
| | 3,141 |
| | 2,071 |
|
Net cash used in investing activities | (330 | ) | | (567 | ) | | (106 | ) | | (914 | ) | | (996 | ) |
Financing activities | | | | | | | | | |
Issuance of long-term debt, net | — |
| | 592 |
| | — |
| | 592 |
| | — |
|
Payments of long-term debt | — |
| | (400 | ) | | (300 | ) | | (400 | ) | | (300 | ) |
Repurchases of Class A common stock | (104 | ) | | (227 | ) | | (2 | ) | | (522 | ) | | (597 | ) |
Dividends paid | (72 | ) | | (71 | ) | | (64 | ) | | (283 | ) | | (254 | ) |
Proceeds from issuance of common stock | 198 |
| | 136 |
| | 240 |
| | 617 |
| | 532 |
|
Minimum tax withholding paid on behalf of employees for restricted stock units | (34 | ) | | (34 | ) | | (26 | ) | | (127 | ) | | (130 | ) |
Net cash used in financing activities | (12 | ) | | (4 | ) | | (152 | ) | | (123 | ) | | (749 | ) |
Increase (decrease) in cash and cash equivalents | 291 |
| | (110 | ) | | 133 |
| | 888 |
| | 40 |
|
Cash and cash equivalents at beginning of period | 2,254 |
| | 2,364 |
| | 1,524 |
| | 1,657 |
| | 1,617 |
|
Cash and cash equivalents at end of period | $ | 2,545 |
| | $ | 2,254 |
| | $ | 1,657 |
| | $ | 2,545 |
| | $ | 1,657 |
|
|
| | | | | | | |
BROADCOM CORPORATION |
Unaudited Condensed Consolidated Balance Sheets |
(In millions) |
| | | |
| December 31,
2014 | | December 31,
2013 |
ASSETS |
| | | |
Current assets: | | | |
Cash and cash equivalents | $ | 2,545 |
| | $ | 1,657 |
|
Short-term marketable securities | 1,061 |
| | 775 |
|
Accounts receivable, net | 804 |
| | 795 |
|
Inventory | 531 |
| | 525 |
|
Prepaid expenses and other current assets | 131 |
| | 163 |
|
Total current assets | 5,072 |
| | 3,915 |
|
Property and equipment, net | 516 |
| | 593 |
|
Long-term marketable securities | 2,383 |
| | 1,939 |
|
Goodwill | 3,710 |
| | 3,793 |
|
Purchased intangible assets, net | 664 |
| | 1,144 |
|
Other assets | 126 |
| | 111 |
|
Total assets | $ | 12,471 |
| | $ | 11,495 |
|
| | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY |
| | | |
Current liabilities: | | | |
Accounts payable | $ | 503 |
| | $ | 585 |
|
Wages and related benefits | 220 |
| | 243 |
|
Deferred revenue and income | 36 |
| | 21 |
|
Accrued liabilities | 791 |
| | 647 |
|
Total current liabilities | 1,550 |
| | 1,496 |
|
Long-term debt | 1,593 |
| | 1,394 |
|
Other long-term liabilities | 277 |
| | 234 |
|
Commitments and contingencies | | | |
Shareholders' equity | 9,051 |
| | 8,371 |
|
Total liabilities and shareholders’ equity | $ | 12,471 |
| | $ | 11,495 |
|
|
| | | | | | | | | | | |
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION |
(In millions) |
| December 31,
2014 | | September 30,
2014 | | December 31,
2013 |
Cash and cash equivalents | $ | 2,545 |
| | $ | 2,254 |
| | $ | 1,657 |
|
Short-term marketable securities | 1,061 |
| | 1,068 |
| | 775 |
|
Long-term marketable securities | 2,383 |
| | 2,098 |
| | 1,939 |
|
Total cash, cash equivalents and marketable securities | $ | 5,989 |
| | $ | 5,420 |
| | $ | 4,371 |
|
Increase from prior period end | $ | 569 |
| | | | |
Increase from prior year end | $ | 1,618 |
| | | | |
|
| | | | | | | | | | | | | | | | | | | |
BROADCOM CORPORATION |
Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments |
(In millions) |
| | | |
| Three Months Ended | | Year Ended |
| December 31, | | September 30, | | December 31, | | December 31, |
| 2014 | | 2014 | | 2013 | | 2014 | | 2013 |
| | | | | | | | | |
Net revenue | $ | 2,143 |
| | $ | 2,260 |
| | $ | 2,064 |
| | $ | 8,428 |
| | 8,305 |
|
GAAP cost of revenue | 1,012 |
| | 1,077 |
| | 1,026 |
| | 4,098 |
| | 4,088 |
|
GAAP gross profit | $ | 1,131 |
| | $ | 1,183 |
| | $ | 1,038 |
| | $ | 4,330 |
| | $ | 4,217 |
|
GAAP gross margin | 52.8 | % | | 52.3 | % | | 50.3 | % | | 51.4 | % | | 50.8 | % |
| | | | | | | | | |
| | | | | | | | | |
GAAP cost of revenue | $ | 1,012 |
| | $ | 1,077 |
| | $ | 1,026 |
| | $ | 4,098 |
| | $ | 4,088 |
|
Adjustments: | | | | | | | | | |
Amortization of purchased intangible assets | (42 | ) | | (46 | ) | | (42 | ) | | (185 | ) | | (171 | ) |
Amortization of acquired inventory step-up and inventory charges related to the exit of the cellular baseband business | — |
| | 7 |
| | — |
| | (27 | ) | | (1 | ) |
Non-GAAP cost of revenue | $ | 970 |
| | $ | 1,038 |
| | $ | 984 |
| | $ | 3,886 |
| | $ | 3,916 |
|
| | | | | | | | | |
| | | | | | | | | |
Net revenue | $ | 2,143 |
| | $ | 2,260 |
| | $ | 2,064 |
| | $ | 8,428 |
| | 8,305 |
|
Non-GAAP cost of revenue | 970 |
| | 1,038 |
| | 984 |
| | 3,886 |
| | 3,916 |
|
Non-GAAP gross profit | $ | 1,173 |
| | $ | 1,222 |
| | $ | 1,080 |
| | $ | 4,542 |
| | $ | 4,389 |
|
Non-GAAP gross margin | 54.7 | % | | 54.1 | % | | 52.3 | % | | 53.9 | % | | 52.8 | % |
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
BROADCOM CORPORATION |
Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments |
(In millions) |
| | | |
| Three Months Ended | | Year Ended |
| December 31, | | September 30, | | December 31, | | December 31, |
| 2014 | | 2014 | | 2013 | | 2014 | | 2013 |
| | | | | | | | | |
GAAP net income | $ | 390 |
| | $ | 98 |
| | $ | 168 |
| | $ | 652 |
| | $ | 424 |
|
Adjustments: | | | | | | | | | |
Amortization of purchased intangible assets | 45 |
| | 54 |
| | 56 |
| | 214 |
| | 228 |
|
Amortization of acquired inventory step-up and inventory charges related to the exit of the cellular baseband business | — |
| | (7 | ) | | — |
| | 27 |
| | 1 |
|
Impairment of long-lived assets | 14 |
| | 200 |
| | — |
| | 404 |
| | 511 |
|
Settlement costs (gains) | (4 | ) | | 2 |
| | 6 |
| | 16 |
| | (69 | ) |
Other charges (gains), net | — |
| | (1 | ) | | — |
| | (60 | ) | | 25 |
|
Restructuring costs, net | 16 |
| | 114 |
| | 17 |
| | 158 |
| | 29 |
|
Other expense (income), net | 3 |
| | — |
| | — |
| | 6 |
| | (1 | ) |
Certain income tax expense (benefit) | (1 | ) | | 1 |
| | — |
| | (6 | ) | | (10 | ) |
Total GAAP to Non-GAAP adjustments | $ | 73 |
| | $ | 363 |
| | $ | 79 |
| | $ | 759 |
| | $ | 714 |
|
Non-GAAP net income (including stock-based compensation) | 463 |
| | 461 |
| | 247 |
| | 1,411 |
| | 1,138 |
|
Stock-based compensation and related payroll taxes | 99 |
| | 108 |
| | 119 |
| | 444 |
| | 524 |
|
Non-GAAP net income (excluding stock-based compensation) | $ | 562 |
| | $ | 569 |
| | $ | 366 |
| | $ | 1,855 |
| | $ | 1,662 |
|
| | | | | | | | | |
Shares used in calculation - diluted (GAAP and Non-GAAP) | 610 |
| | 607 |
| | 581 |
| | 601 |
| | 584 |
|
Non-GAAP adjustment * | 16 |
| | 20 |
| | 25 |
| | 23 |
| | 28 |
|
Shares used in calculation - diluted (Non-GAAP) (excluding stock-based compensation) | 626 |
| | 627 |
| | 606 |
| | 624 |
| | 612 |
|
| | | | | | | | | |
GAAP diluted net income per share | $ | 0.64 |
| | $ | 0.16 |
| | $ | 0.29 |
| | $ | 1.08 |
| | $ | 0.73 |
|
Non-GAAP diluted net income per share | $ | 0.76 |
| | $ | 0.76 |
| | $ | 0.43 |
| | $ | 2.35 |
| | $ | 1.95 |
|
Non-GAAP diluted net income per share (excluding stock-based compensation) | $ | 0.90 |
| | $ | 0.91 |
| | $ | 0.60 |
| | $ | 2.97 |
| | $ | 2.72 |
|
*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.
BROADCOM CORPORATION
Guidance for the Three Months Ending March 31, 2015
|
| |
| Three Months Ending |
| March 31, 2015 |
Total net revenue (GAAP) | ~$2.00 billion +/- $75 million |
| |
Gross margin (GAAP) | 52.8% +/- 75 basis points |
Gross margin (Non-GAAP*) | 54.7% +/- 75 basis points |
| |
Research & development and selling, general, and administrative expenses * | Up ~$5 million to ~$25 million from Q4'14 |
* Includes stock-based compensation expense.
Broadcom has based the preceding guidance for the three months ending March 31, 2015 on expectations, assumptions and estimates that we believe are reasonable given our assessment of historical trends and other information reasonably available as of January 29, 2015. 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, which now includes stock-based compensation expense.
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, 2013, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and our other SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2014 when it is filed. 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 | T. Peter Andrew |
Vice President, Corporate Communications | Vice President, Treasury and Investor Relations |
415-297-5035 | 949-926-6932 |
kkahn@broadcom.com | andrewtp@broadcom.com |