EX-99.1 2 a34753exv99w1.htm EXHIBIT 99.1 Exhibit 99.1
 

     
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 Third Quarter 2007 Results
Conference Call to be Webcast Today at 1:45 p.m. Pacific Time
IRVINE, Calif. — October 23, 2007 — Broadcom Corporation (Nasdaq: BRCM) today reported unaudited financial results for its third quarter ended September 30, 2007.
Net revenue for the third quarter of 2007 was $950.0 million, an increase of 5.8% compared with the $897.9 million reported for the second quarter of 2007 and an increase of 5.2% compared with the $902.6 million reported for the third quarter of 2006. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the third quarter of 2007 was $27.8 million, or $.05 per share (diluted), compared with GAAP net income of $34.3 million, or $.06 per share (diluted), for the second quarter of 2007, and GAAP net income of $110.2 million, or $.19 per share (diluted), for the third quarter of 2006.
Net revenue for the nine months ended September 30, 2007 was $2.749 billion, an increase of 0.2% compared with the $2.744 billion reported for the nine months ended September 30, 2006. Net income computed in accordance with GAAP for the nine months ended September 30, 2007 was $123.0 million, or $.21 per share (diluted), compared with GAAP net income of $334.0 million, or $.57 per share (diluted), for the nine months ended September 30, 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 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 and nine months ended September 30, 2007 and 2006, respectively, appear in the financial statements portion of this release.

 

 

Non-GAAP net income for the third quarter of 2007, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $164.5 million, or $.27 per share (diluted), compared with non-GAAP net income of $162.1 million, or $.27 per share (diluted), for the second quarter of 2007, and $191.4 million, or $.32 per share (diluted), for the third quarter of 2006.
Non-GAAP net income for the nine months ended September 30, 2007, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $501.7 million, or $.84 per share (diluted), compared with non-GAAP net income of $637.6 million, or $1.05 per share (diluted), for the nine months ended September 30, 2006.
“New product cycles enabled Broadcom to attain record revenue and generate strong operating cash flow in the third quarter,” said Scott A. McGregor, Broadcom’s President and Chief Executive Officer. “Our record revenue was driven by strength in the Bluetooth®, wireless LAN and digital TV markets. Broadcom continues to be a product cycle-driven company with a strong track record of successfully entering new markets. Looking forward, in the fourth quarter and in 2008 we will continue to invest aggressively in research and development of products for the very large cellular handset market, as well as new product offerings to address more of our existing customers’ needs.”
Conference Call Information
As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its third quarter 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, Tuesday, November 6, 2007.

 

 

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.
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 2006 revenue of $3.67 billion, and holds over 2,300 U.S. and 1,000 foreign patents, more than 7,100 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 +1.949.926.5900 or at www.broadcom.com.
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, 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; the quality of our products and any potential remediation costs; 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 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; 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; 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; 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 availability and pricing of third party semiconductor foundry, assembly and test capacity and raw materials; 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 of producing products with new suppliers and at new fabrication and assembly and test facilities; 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.

 

 

BROADCOM CORPORATION
Unaudited GAAP Consolidated Statements of Income
(In thousands, except per share amounts)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     2007     2006  
Net revenue
   $ 949,959     $ 902,586     $ 2,749,360     $ 2,744,364  
Cost of revenue (1)
     465,970       450,164       1,343,956       1,341,747  
 
                        
Gross profit
     483,989       452,422       1,405,404       1,402,617  
Operating expense:
                                
Research and development (2)
     352,283       272,565       985,223       804,283  
Selling, general and administrative (3)
     124,907       125,281       373,413       360,162  
Amortization of purchased intangible assets (4)
     314       329       843       2,017  
In-process research and development (4)
     4,970       —       15,470       5,200  
Impairment of other intangible assets (4)
     —       —       1,500       —  
 
                        
Income from operations
     1,515       54,247       28,955       230,955  
Interest income, net
     31,443       31,826       101,355       83,758  
Other income (expense), net (5)
     (1,670 )     299       (2,437 )     3,518  
 
                        
Income before income taxes
     31,288       86,372       127,873       318,231  
Provision (benefit) for income taxes (6)
     3,528       (23,809 )     4,866       (15,734 )
 
                        
Net income
   $ 27,760     $ 110,181     $ 123,007     $ 333,965  
 
                        
Net income per share (basic)
   $ .05     $ .20     $ .23     $ .61  
 
                        
Net income per share (diluted)
   $ .05     $ .19     $ .21     $ .57  
 
                        
Weighted average shares (basic)
     539,931       547,927       542,881       544,895  
 
                        
Weighted average shares (diluted)
     577,583       572,597       579,479       589,449  
 
                        

 

 

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     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     2007     2006  
    (In thousands)  
(1) Cost of revenue:
                                
Stock-based compensation
   $ 7,214     $ 5,742     $ 19,889     $ 19,133  
Amortization of purchased intangible assets
     3,935       2,314       9,551       8,039  
Charges related to equity award review
     —       —       89       —  
Employer payroll tax expense on certain stock option exercises
     51       26       147       784  
 
                        
 
   $ 11,200     $ 8,082     $ 29,676     $ 27,956  
 
                        
 
                                
(2) Research and development expense:
                                
Stock-based compensation
   $ 94,619     $ 78,191     $ 263,882     $ 234,616  
Charges related to equity award review
     —       1,339       1,333       1,339  
Employer payroll tax expense on certain stock option exercises
     1,191       365       3,231       7,784  
 
                        
 
   $ 95,810     $ 79,895     $ 268,446     $ 243,739  
 
                        
 
                                
(3) Selling, general and administrative expense:
                                
Stock-based compensation
   $ 37,023     $ 37,595     $ 106,256     $ 108,230  
Charges related to equity award review
     —       260       1,987       260  
Employer payroll tax expense on certain stock option exercises
     242       157       926       4,022  
 
                        
 
   $ 37,265     $ 38,012     $ 109,169     $ 112,512  
 
                        
 
                                
(4) Amortization of purchased intangible assets
   $ 314     $ 329     $ 843     $ 2,017  
In-process research and development
     4,970       —       15,470       5,200  
Impairment of other intangible assets
     —       —       1,500       —  
 
                        
 
   $ 5,284     $ 329     $ 17,813     $ 7,217  
 
                        
 
                                
(5) Other income (expense), net:
                                
Loss (gain) on strategic investments, net
   $ 2,121     $ —     $ 4,769     $ (700 )
Non-operating gains
     (146 )     —       (275 )     (482 )
 
                        
 
   $ 1,975     $ —     $ 4,494     $ (1,182 )
 
                        
 
                                
(6) Provision (benefit) for income taxes:
                                
Income tax benefits from adjustments to tax reserves of certain foreign subsidiaries or various foreign jurisdictions
   $ —     $ (27,900 )   $ (4,583 )   $ (29,600 )
Income tax effects
     (14,754 )     (17,178 )     (46,298 )     (56,981 )
 
                        
 
   $ (14,754 )   $ (45,078 )   $ (50,881 )   $ (86,581 )
 
                        

 

 

BROADCOM CORPORATION
Unaudited Reconciliation of Non-GAAP Adjustments
(In thousands, except per share amounts)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     2007     2006  
GAAP net income
   $ 27,760     $ 110,181     $ 123,007     $ 333,965  
Non-GAAP adjustments:
                                
Stock-based compensation:
                                
Cost of revenue
     7,214       5,742       19,889       19,133  
Research and development
     94,619       78,191       263,882       234,616  
Selling, general and administrative
     37,023       37,595       106,256       108,230  
Acquisition-related items:
                                
Amortization of purchased intangible assets:
                                
Cost of revenue
     3,935       2,314       9,551       8,039  
Other operating expense
     314       329       843       2,017  
In-process research and development
     4,970       —       15,470       5,200  
Impairment of other intangible assets
     —       —       1,500       —  
Employer payroll tax expense on certain stock option exercises:
                                
Cost of revenue
     51       26       147       784  
Research and development
     1,191       365       3,231       7,784  
Selling, general and administrative
     242       157       926       4,022  
Charges related to equity award review:
                                
Cost of revenue
     —       —       89       —  
Research and development
     —       1,339       1,333       1,339  
Selling, general and administrative
     —       260       1,987       260  
Loss (gain) on strategic investments, net
     2,121       —       4,769       (700 )
Non-operating gains
     (146 )     —       (275 )     (482 )
Income tax benefits from adjustments to tax reserves of certain foreign subsidiaries or various foreign jurisdictions
     —       (27,900 )     (4,583 )     (29,600 )
Income tax effects
     (14,754 )     (17,178 )     (46,298 )     (56,981 )
 
                        
Total of non-GAAP adjustments
     136,780       81,240       378,717       303,661  
 
                        
Non-GAAP net income
   $ 164,540     $ 191,421     $ 501,724     $ 637,626  
 
                        
 
                                
GAAP weighted average shares (diluted)
     577,583       572,597       579,479       589,449  
Non-GAAP adjustment
     22,320       22,150       20,883       20,237  
 
                        
Non-GAAP weighted average shares (diluted)
     599,903       594,747       600,362       609,686  
 
                        
 
                                
GAAP net income per share (diluted)
   $ .05     $ .19     $ .21     $ .57  
Non-GAAP adjustments detailed above
     .22       .13       .63       .48  
 
                        
Non-GAAP net income per share (diluted)
   $ .27     $ .32     $ .84     $ 1.05  
 
                        
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.

 

 

BROADCOM CORPORATION
Unaudited GAAP Condensed Consolidated Statements of Cash Flows
(In thousands)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     2007     2006  
Operating activities
                                
Net income
   $ 27,760     $ 110,181     $ 123,007     $ 333,965  
Adjustments to reconcile net income to net cash provided by operating activities:
                                
Depreciation and amortization
     15,712       11,880       44,736       35,205  
Stock-based compensation expense:
                                
Stock options and other awards
     84,128       87,140       249,326       268,388  
Restricted stock units issued by the Company
     54,728       34,388       140,701       93,591  
Acquisition-related items:
                                
Amortization of purchased intangible assets
     4,249       2,643       10,394       10,056  
In-process research and development
     4,970       —       15,470       5,200  
Impairment of other intangible assets
     —       —       1,500       —  
Loss (gain) on strategic investments, net
     2,121       —       4,769       (700 )
Changes in operating assets and liabilities:
                                
Accounts receivable
     (11,509 )     (15,998 )     (8,330 )     (116,899 )
Inventory
     (20,399 )     54,508       (8,929 )     (28,332 )
Prepaid expenses and other assets
     (24,964 )     (3,809 )     (41,610 )     13,938  
Accounts payable
     44,547       (80,590 )     55,149       (52,875 )
Accrued settlement liabilities
     —       —       (2,000 )     (2,000 )
Other accrued and long-term liabilities
     30,507       29,522       30,800       47,320  
 
                        
Net cash provided by operating activities
     211,850       229,865       614,983       606,857  
 
                        
Investing activities
                                
Net purchases of property and equipment
     (15,939 )     (19,926 )     (123,318 )     (57,155 )
Net cash paid for acquisitions and other purchased intangible assets
     (141,372 )     (2,204 )     (219,324 )     (70,125 )
Net proceeds from sales (cash paid for purchases) of strategic investments
     —       —       (3,194 )     137  
Net proceeds (purchases) of marketable securities
     43,413       (87,771 )     250,449       (188,381 )
 
                        
Net cash used in investing activities
     (113,898 )     (109,901 )     (95,387 )     (315,524 )
 
                        
Financing activities
                                
Repurchases of Class A common stock
     (170,534 )     (29,631 )     (811,822 )     (275,733 )
Net proceeds from issuance of common stock
     65,459       (907 )     171,330       479,209  
Payments on assumed debt and other obligations
     —       —       —       (4,625 )
Excess tax benefits from stock-based compensation
     —       —       —       338  
 
                        
Net cash provided by (used in) financing activities
     (105,075 )     (30,538 )     (640,492 )     199,189  
 
                        
Increase (decrease) in cash and cash equivalents
     (7,123 )     89,426       (120,896 )     490,522  
Cash and cash equivalents at beginning of period
     2,044,337       1,838,372       2,158,110       1,437,276  
 
                        
Cash and cash equivalents at end of period
   $ 2,037,214     $ 1,927,798     $ 2,037,214     $ 1,927,798  
 
                        
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
                         
    September 30,     June 30,     December 31,  
    2007     2007     2006  
    (In thousands)  
Cash and cash equivalents
   $ 2,037,214     $ 2,044,337     $ 2,158,110  
Short-term marketable securities
     308,932       370,336       522,340  
Long-term marketable securities
     84,107       66,116       121,148  
 
                  
Total cash, cash equivalents and marketable securities
   $ 2,430,253     $ 2,480,789     $ 2,801,598  
 
                  
Decrease from prior quarter end
   $ (50,536 )                
 
                      
Decrease from prior year end
   $ (371,345 )                
 
                      

 

 

BROADCOM CORPORATION
Unaudited GAAP Condensed Consolidated Balance Sheets
(In thousands)
                 
    September 30,     December 31,  
    2007     2006  
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 2,037,214     $ 2,158,110  
Short-term marketable securities
     308,932       522,340  
Accounts receivable, net
     395,732       382,823  
Inventory
     213,160       202,794  
Prepaid expenses and other current assets
     127,940       85,721  
 
            
Total current assets
     3,082,978       3,351,788  
Property and equipment, net
     226,079       164,699  
Long-term marketable securities
     84,107       121,148  
Goodwill
     1,365,764       1,185,145  
Purchased intangible assets, net
     50,725       29,029  
Other assets
     31,387       24,957  
 
            
Total assets
   $ 4,841,040     $ 4,876,766  
 
            
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
   $ 349,759     $ 307,972  
Wages and related benefits
     159,132       104,940  
Deferred revenue
     6,371       1,873  
Accrued liabilities
     241,894       263,916  
 
            
Total current liabilities
     757,156       678,701  
Commitments and contingencies
               
Long-term deferred revenue
     5,990       —  
Other long-term liabilities
     33,094       6,399  
Shareholders’ equity
     4,044,800       4,191,666  
 
            
Total liabilities and shareholders’ equity
   $ 4,841,040     $ 4,876,766  
 
            
-###-