EX-99.1 2 a37353exv99w1.htm EXHIBIT 99.1 Exhibit 99.1
 

NEWS RELEASE
     
Broadcom Business Press Contact
 Bill Blanning
Vice President, Global Media Relations
949-926-5555
blanning@broadcom.com
  Broadcom Investor Relations Contact
T. Peter Andrew
Vice President, Corporate Communications
949-926-5663
andrewtp@broadcom.com
Broadcom Reports Fourth Quarter and Year 2007 Results
Conference Call to be Webcast Today at 1:45 p.m. Pacific Time
IRVINE, Calif. — January 24, 2008 — Broadcom Corporation (Nasdaq: BRCM) today reported unaudited financial results for its fourth quarter and year ended December 31, 2007.
Net revenue for the fourth quarter of 2007 was $1.027 billion, an increase of 8.1% compared with the $950.0 million reported for the third quarter of 2007 and an increase of 11.2% compared with the $923.5 million reported for the fourth quarter of 2006. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the fourth quarter of 2007 was $90.3 million, or $.16 per share (diluted), compared with GAAP net income of $27.8 million, or $.05 per share (diluted), for the third quarter of 2007, and GAAP net income of $45.1 million, or $.08 per share (diluted), for the fourth quarter of 2006.
Net revenue for the year ended December 31, 2007 was $3.78 billion, an increase of 3.0% compared with the $3.67 billion reported for the year ended December 31, 2006. Net income computed in accordance with GAAP for the year ended December 31, 2007 was $213.3 million, or $.37 per share (diluted), compared with GAAP net income of $379.0 million, or $.64 per share (diluted), for the year ended December 31, 2006.
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
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Broadcom Reports Fourth Quarter and Year 2007 Results
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net income per share.” A discussion of Broadcom’s use of these non-GAAP financial measures is set forth below, and reconciliations of GAAP net income to non-GAAP net income for the three months and years ended December 31, 2007 and 2006, respectively, appear in the financial statements portion of this release.
Non-GAAP net income for the fourth quarter of 2007, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $200.8 million, or $.34 per share (diluted), compared with non-GAAP net income of $164.5 million, or $.27 per share (diluted), for the third quarter of 2007, and $184.9 million, or $.31 per share (diluted), for the fourth quarter of 2006.
Non-GAAP net income for the year ended December 31, 2007, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $702.5 million, or $1.17 per share (diluted), compared with non-GAAP net income of $822.5 million, or $1.35 per share (diluted), for the year ended December 31, 2006.
Net revenue for the fourth quarter and year ended December 31, 2007 includes royalties in the amount of $31.8 million from a patent license agreement entered into in July 2007.
“2007 ended strongly as Broadcom generated record revenue for the fourth quarter and the full year, driven by the ramp in new product cycles occurring in the Bluetooth®, wireless LAN and digital TV markets,” said Scott McGregor, Broadcom’s President and Chief Executive Officer. “Broadcom remains a product cycle driven company, and to continue this product cycle momentum into the future, we made a number of strategic acquisitions and significant internal investments in 2007. We believe that as the convergence of technologies, products and markets continues, the winners will be the companies that possess all of the communication technologies required to build these next generation products. Broadcom remains well positioned to benefit from this trend.”
“As we look into 2008, we believe that Bluetooth, wireless LAN and digital TV will continue to be key revenue drivers, plus we look forward to the emergence of new product areas such as HD DVD, cellular and GPS, in addition to continued growth opportunities within our
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Broadcom Reports Fourth Quarter and Year 2007 Results
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traditional end markets, such as switching and set-top boxes. While Broadcom will continue to invest to bring these and other new products to market, we have tightened our processes and made additional strategic portfolio management decisions in the fourth quarter to help moderate expense growth across 2008, with the goal of trending back towards our long-term business model.”
Conference Call Information
As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its fourth quarter and year 2007 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 or 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 5:00 p.m. Pacific Time, Thursday, February 7, 2008.
The financial results included in this release are unaudited. The complete, audited financial statements of the company for the year ended December 31, 2007 will be included in Broadcom’s Annual Report on Form 10-K, to be filed with the SEC later this month.
Discussion of Non-GAAP Financial Measures
Non-GAAP net income consists of net income excluding stock-based compensation expense as well as charges related to acquisitions and 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 non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP net income per share, the calculation of GAAP weighted average shares outstanding (diluted) is adjusted to exclude 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.
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Broadcom Reports Fourth Quarter and Year 2007 Results
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Broadcom believes that the presentation of non-GAAP net income and non-GAAP net income per share provides important supplemental information to management and investors regarding financial and business trends relating to the company’s financial condition and results of operations. For further information regarding why Broadcom believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the company’s Current Report on Form 8-K filed today with the SEC. The Form 8-K is available on the SEC’s website at www.sec.gov or under the “Financial Information” tab of the Investors section of the Broadcom website described above.
About Broadcom
Broadcom Corporation is a major technology innovator and global leader in semiconductors for wired and wireless communications. Broadcom® products enable the delivery of voice, video, data and multimedia to and throughout the home, the office and the mobile environment. We provide the industry’s broadest portfolio of state-of-the-art, system-on-a-chip and software solutions to manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices. These solutions support our core mission: Connecting everything®.
Broadcom is one of the world’s largest fabless semiconductor companies, with unaudited 2007 revenue of $3.78 billion, and holds over 2,500 U.S. and 1,000 foreign patents, more than 7,400 additional pending patent applications, and one of the broadest intellectual property portfolios addressing both wired and wireless transmission of voice, video and data.
Broadcom is headquartered in Irvine, Calif., and has offices and research facilities in North America, Asia and Europe. Broadcom may be contacted at +1.949.926.5000 or at www.broadcom.com.
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Broadcom Reports Fourth Quarter and Year 2007 Results
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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
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. 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. 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 risk that the unaudited results reported in this press release could be modified as the audit of our 2007 financial statements is completed; general economic and political conditions and specific conditions in the markets we address, including the continuing volatility in the technology sector and semiconductor industry, trends in the broadband communications markets in various geographic regions, including seasonality in sales of consumer products into which our products are incorporated, and possible disruption in commercial activities related to terrorist activity or armed conflict; the timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory; the gain or loss of a key customer, design win or order; the rate at which our present and future customers and end-users adopt Broadcom’s technologies and products in our target markets; our ability to scale our operations in response to changes in demand for our existing products and services or demand for new products requested by our customers; our ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a cost-effective and timely manner; our dependence on a few significant customers for a substantial portion of our revenue; intellectual property disputes and customer indemnification claims and other types of litigation risk; risks and uncertainties resulting from Broadcom’s recent equity award review, including potential claims and proceedings related to such matters, such as shareholder litigation and any action by the SEC, U.S. Attorney’s Office or other governmental agency that could result in civil or criminal sanctions against the company and/or certain of our current or former officers, directors or employees, or other actions taken or required as a result of the review; our ability to retain, recruit and hire key executives, technical personnel and other employees in the positions and numbers, with the experience and capabilities, and at the compensation levels needed to implement our business and product plans; the quality of our products and any potential remediation costs; the availability and pricing of third party semiconductor foundry, assembly and test capacity and raw materials; the risks of producing products with new suppliers and at new fabrication and assembly and test facilities; problems or delays that we may face in shifting our products to smaller geometry process technologies and in achieving higher levels of design integration; our ability to timely and accurately predict market requirements and evolving industry standards and to identify opportunities in new markets; delays in the adoption and
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acceptance of industry standards in our target markets; changes in our product or customer mix; the volume of our product sales and pricing concessions on volume sales; the effectiveness of our expense and product cost control and reduction efforts; competitive pressures and other factors such as the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products; the timing of customer-industry qualification and certification of our products and the risks of non-qualification or non-certification; fluctuations in the manufacturing yields of our third party semiconductor foundries and other problems or delays in the fabrication, assembly, testing or delivery of our products; the risks and uncertainties associated with our international operations, particularly in light of terrorist activity, armed conflict or political unrest; the effects of natural disasters, public health emergencies, international conflicts and other events beyond our control; and the level of orders received that can be shipped in a fiscal quarter; and other factors.
Our Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission 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 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 for any reason.
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. Bluetooth® is a trademark of the Bluetooth SIG. Any other trademarks or trade names mentioned are the property of their respective owners.
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Broadcom Reports Fourth Quarter and Year 2007 Results
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BROADCOM CORPORATION
Unaudited GAAP Consolidated Statements of Income
(In thousands, except per share amounts)
                                 
    Three Months Ended     Years Ended  
    December 31,     December 31,  
    2007(a)     2006     2007(a)     2006  
Net revenue
   $ 1,027,035     $ 923,454     $ 3,776,395     $ 3,667,818  
Cost of revenue (1)
     488,222       453,818       1,832,178       1,795,565  
 
                        
Gross profit
     538,813       469,636       1,944,217       1,872,253  
Operating expense:
                                
Research and development (2)
     363,285       312,731       1,348,508       1,117,014  
Selling, general and administrative (3)
     119,324       143,850       492,737       504,012  
Amortization of purchased intangible assets (4)
     184       330       1,027       2,347  
In-process research and development (4)
     —       —       15,470       5,200  
Impairment of other intangible assets (4)
     —       —       1,500       —  
 
                        
Income from operations
     56,020       12,725       84,975       243,680  
Interest income, net
     29,714       35,239       131,069       118,997  
Other income, net (5)
     5,849       446       3,412       3,964  
 
                        
Income before income taxes
     91,583       48,410       219,456       366,641  
Provision (benefit) for income taxes (6)
     1,248       3,334       6,114       (12,400 )
 
                        
Net income
   $ 90,335     $ 45,076     $ 213,342     $ 379,041  
 
                        
Net income per share (basic)
   $ .17     $ .08     $ .39     $ .69  
 
                        
Net income per share (diluted)
   $ .16     $ .08     $ .37     $ .64  
 
                        
Weighted average shares (basic)
     541,006       548,210       542,412       545,724  
 
                        
Weighted average shares (diluted)
     572,289       584,927       577,682       588,318  
 
                        
(a) Includes royalties in the amount of $31.8 million from a patent license agreement entered into in July 2007.
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Listed below are the items included in net income that management excludes in computing the unaudited non-GAAP financial measures referred to in the text and tables of this press release and further described under “Discussion of Non-GAAP Financial Measures.”
                                 
    Three Months Ended     Years Ended  
    December 31,     December 31,  
    2007     2006     2007     2006  
    (In thousands)  
(1) Cost of revenue:
                                
Stock-based compensation
   $ 6,581     $ 5,456     $ 26,470     $ 24,589  
Amortization of purchased intangible assets
     3,934       2,017       13,485       10,056  
Charges related to equity award review
     —       2,469       89       2,469  
Employer payroll tax expense on certain stock option exercises
     92       —       239       784  
 
                        
 
   $ 10,607     $ 9,942     $ 40,283     $ 37,898  
 
                        
 
                                
(2) Research and development expense:
                                
Stock-based compensation
   $ 89,767     $ 72,480     $ 353,649     $ 307,096  
Charges related to equity award review
     —       22,286       1,333       23,625  
Employer payroll tax expense on certain stock option exercises
     2,400       —       5,631       7,784  
 
                        
 
   $ 92,167     $ 94,766     $ 360,613     $ 338,505  
 
                        
 
                                
(3) Selling, general and administrative expense:
                                
Stock-based compensation
   $ 33,277     $ 28,449     $ 139,533     $ 136,679  
Charges related to equity award review
     —       23,547       1,987       23,807  
Employer payroll tax expense on certain stock option exercises
     690       —       1,616       4,022  
 
                        
 
   $ 33,967     $ 51,996     $ 143,136     $ 164,508  
 
                        
 
                                
(4) Amortization of purchased intangible assets.
   $ 184     $ 330     $ 1,027     $ 2,347  
In-process research and development
     —       —       15,470       5,200  
Impairment of other intangible assets
     —       —       1,500       —  
 
                        
 
   $ 184     $ 330     $ 17,997     $ 7,547  
 
                        
 
                                
(5) Other income, net:
                                
Loss (gain) on strategic investments, net
   $ (2,960 )   $ —     $ 1,809     $ (700 )
Non-operating gains
     (2,444 )     —       (2,719 )     (482 )
 
                        
 
   $ (5,404 )   $ —     $ (910 )   $ (1,182 )
 
                        
 
                                
(6) Provision (benefit) for income taxes:
                                
Income tax benefits from adjustments to tax reserves of certain foreign subsidiaries or various foreign jurisdictions
   $ (1,403 )   $ (200 )   $ (5,986 )   $ (29,800 )
Income tax effects
     (19,659 )     (17,011 )     (65,957 )     (73,992 )
 
                        
 
   $ (21,062 )   $ (17,211 )   $ (71,943 )   $ (103,792 )
 
                        
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Broadcom Reports Fourth Quarter and Year 2007 Results
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BROADCOM CORPORATION
Unaudited Reconciliation of Non-GAAP Adjustments
(In thousands, except per share amounts)
                                 
    Three Months Ended     Years Ended  
    December 31,     December 31,  
    2007     2006     2007     2006  
GAAP net income
   $ 90,335     $ 45,076     $ 213,342     $ 379,041  
Non-GAAP adjustments:
                                
Stock-based compensation:
                                
Cost of revenue
     6,581       5,456       26,470       24,589  
Research and development
     89,767       72,480       353,649       307,096  
Selling, general and administrative
     33,277       28,449       139,533       136,679  
Acquisition-related items:
                                
Amortization of purchased intangible assets:
                                
Cost of revenue
     3,934       2,017       13,485       10,056  
Other operating expense
     184       330       1,027       2,347  
In-process research and development
     —       —       15,470       5,200  
Impairment of other intangible assets
     —       —       1,500       —  
Employer payroll tax expense on certain stock option exercises:
                                
Cost of revenue
     92       —       239       784  
Research and development
     2,400       —       5,631       7,784  
Selling, general and administrative
     690       —       1,616       4,022  
Charges related to equity award review:
                                
Cost of revenue
     —       2,469       89       2,469  
Research and development
     —       22,286       1,333       23,625  
Selling, general and administrative
     —       23,547       1,987       23,807  
Loss (gain) on strategic investments, net
     (2,960 )     —       1,809       (700 )
Non-operating gains
     (2,444 )     —       (2,719 )     (482 )
Income tax benefits from adjustments to tax reserves of certain foreign subsidiaries or various foreign jurisdictions
     (1,403 )     (200 )     (5,986 )     (29,800 )
Income tax effects
     (19,659 )     (17,011 )     (65,957 )     (73,992 )
 
                        
Total of non-GAAP adjustments
     110,459       139,823       489,176       443,484  
 
                        
Non-GAAP net income
   $ 200,794     $ 184,899     $ 702,518     $ 822,525  
 
                        
 
GAAP weighted average shares (diluted)
     572,289       584,927       577,682       588,318  
Non-GAAP adjustment
     20,284       19,814       20,733       20,132  
 
                        
Non-GAAP weighted average shares (diluted)
     592,573       604,741       598,415       608,450  
 
                        
 
GAAP net income per share (diluted)
   $ .16     $ .08     $ .37     $ .64  
Non-GAAP adjustments detailed above
     .18       .23       .80       .71  
 
                        
Non-GAAP net income per share (diluted)
   $ .34     $ .31     $ 1.17     $ 1.35  
 
                        
Non-GAAP net income per share is calculated by dividing non-GAAP net income by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP net income per share, the calculation of GAAP weighted average shares outstanding (diluted) is adjusted to exclude 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 believes that the presentation of non-GAAP net income and non-GAAP net income per share provides important supplemental information to management and investors regarding financial and business trends relating to the company’s financial condition and results of operations. For further information regarding why Broadcom believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the company’s Current Report on Form 8-K regarding this earnings press release filed today with the SEC.
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Broadcom Reports Fourth Quarter and Year 2007 Results
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BROADCOM CORPORATION
Unaudited GAAP Condensed Consolidated Statements of Cash Flows
(In thousands)
                                 
    Three Months Ended     Years Ended  
    December 31,     December 31,  
    2007     2006     2007     2006  
Operating activities
                                
Net income
   $ 90,335     $ 45,076     $ 213,342     $ 379,041  
Adjustments to reconcile net income to net cash provided by operating activities:
                                
Depreciation and amortization
     16,782       12,397       61,518       47,602  
Stock-based compensation expense:
                                
Stock options and other awards
     74,935       72,277       324,261       340,665  
Restricted stock units issued by the Company
     54,690       34,108       195,391       127,699  
Acquisition-related items:
                                
Amortization of purchased intangible assets
     4,118       2,347       14,512       12,403  
In-process research and development
     —       —       15,470       5,200  
Impairment of other intangible assets
     —       —       1,500       —  
Loss (gain) on strategic investments, net
     (2,960 )     —       1,809       (700 )
Changes in operating assets and liabilities:
                                
Accounts receivable
     26,730       41,476       18,400       (75,423 )
Inventory
     (18,153 )     20,734       (27,082 )     (7,598 )
Prepaid expenses and other assets
     (18,081 )     6,228       (59,691 )     20,166  
Accounts payable
     (32,295 )     44,539       22,854       (8,336 )
Accrued settlement liabilities
     —       (11 )     (2,000 )     (2,011 )
Other accrued and long-term liabilities
     20,825       5,631       51,625       52,951  
 
                        
Net cash provided by operating activities
     216,926       284,802       831,909       891,659  
 
                        
Investing activities
                                
Net purchases of property and equipment
     (36,265 )     (35,322 )     (159,583 )     (92,477 )
Net cash paid for acquisitions and other purchased intangible assets
     —       75       (219,324 )     (70,050 )
Net proceeds from sales (cash paid for purchases) of strategic investments
     3,506       (2,121 )     312       (1,984 )
Net proceeds (purchases) of marketable securities
     175,959       (16,862 )     426,408       (205,243 )
 
                        
Net cash provided by (used in) investing activities
     143,200       (54,230 )     47,813       (369,754 )
 
                        
Financing activities
                                
Repurchases of Class A common stock
     (328,391 )     —       (1,140,213 )     (275,733 )
Net proceeds from issuance of common stock
     117,623       78       288,953       475,887  
Payments on assumed debt and other obligations
     —       —       —       (4,625 )
Repayment of notes receivable by employees
     —       —       —       3,400  
Excess tax benefits from stock-based compensation
     —       (338 )     —       —  
 
                        
Net cash provided by (used in) financing activities
     (210,768 )     (260 )     (851,260 )     198,929  
 
                        
Increase in cash and cash equivalents
     149,358       230,312       28,462       720,834  
Cash and cash equivalents at beginning of period
     2,037,214       1,927,798       2,158,110       1,437,276  
 
                        
Cash and cash equivalents at end of period
   $ 2,186,572     $ 2,158,110     $ 2,186,572     $ 2,158,110  
 
                        
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
                         
    December 31,     September 30,     December 31,  
    2007     2007     2006  
    (In thousands)  
Cash and cash equivalents
   $ 2,186,572     $ 2,037,214     $ 2,158,110  
Short-term marketable securities
     141,728       308,932       522,340  
Long-term marketable securities
     75,352       84,107       121,148  
 
                  
Total cash, cash equivalents and marketable securities
   $ 2,403,652     $ 2,430,253     $ 2,801,598  
 
                  
Decrease from prior quarter end
   $ (26,601 )                
 
                      
Decrease from prior year end
   $ (397,946 )                
 
                      
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Broadcom Reports Fourth Quarter and Year 2007 Results
Page 11
BROADCOM CORPORATION
Unaudited GAAP Condensed Consolidated Balance Sheets
(In thousands)
                 
    December 31,     December 31,  
    2007     2006  
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 2,186,572     $ 2,158,110  
Short-term marketable securities
     141,728       522,340  
Accounts receivable, net
     369,004       382,823  
Inventory
     231,313       202,794  
Prepaid expenses and other current assets
     125,663       85,721  
 
            
Total current assets
     3,054,280       3,351,788  
Property and equipment, net
     241,803       164,699  
Long-term marketable securities
     75,352       121,148  
Goodwill
     1,376,721       1,185,145  
Purchased intangible assets, net
     46,607       29,029  
Other assets
     43,430       24,957  
 
            
Total assets
   $ 4,838,193     $ 4,876,766  
 
            
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
   $ 313,621     $ 307,972  
Wages and related benefits
     147,853       104,940  
Deferred revenue
     15,864       1,873  
Accrued liabilities
     280,271       263,916  
 
            
Total current liabilities
     757,609       678,701  
Commitments and contingencies
           
Long-term deferred revenue
     8,108       —  
Other long-term liabilities
     36,328       6,399  
Shareholders’ equity
     4,036,148       4,191,666  
 
            
Total liabilities and shareholders’ equity
   $ 4,838,193     $ 4,876,766  
 
            
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