EX-99.1 2 dex991.htm RELEASE DISTRIBUTED BY AVAGO TECHNOLOGIES FINANCE PTE. LTD. Release distributed by Avago Technologies Finance Pte. Ltd.

Exhibit 99.1

Avago Finance Announces First Quarter

Fiscal Year 2009 Financial Results

 

   

Quarterly revenue of $368 million, down 8.5% year-over-year

   

Cash and cash equivalents of $195 million compares with $213 million at end of prior quarter

   

Adjusted EBITDA of $81 million compares with $84 million in the same period a year ago

SAN JOSE, Calif., and SINGAPORE – February 25, 2009 – Avago Technologies Finance Pte. Ltd. (“Avago Finance”), a leading designer, developer and global supplier of analog semiconductor devices, today reported financial results for its first quarter of fiscal year 2009, ended February 1, 2009.

First Quarter Fiscal 2009 GAAP Results

Revenue was $368 million, a decline of 17.7 percent when compared with the previous quarter, and down 8.5 percent from the same quarter last year. Gross margin was $143 million, or 38.9 percent of sales. This compares with a gross margin of $168 million, or 37.6 percent last quarter. Net income of $6 million compares with net income of $18 million last quarter.

Cash balances at the end of the quarter were $195 million versus $213 million at the end of last quarter. The sequential decrease is consistent with the Company’s seasonal profile and reflects the payment of fiscal year 2008 variable compensation and semi-annual interest payments.

First Quarter Fiscal 2009 Non-GAAP Results

A favorable product mix combined with tight cost control actions resulted in gross margin of $164 million, or 44.6 percent. This compares with gross margin of $184 million, or 41.2 percent last quarter.

R&D expenses were $61 million, or 16.6 percent of revenue. Last quarter, R&D expenses were $68 million. Selling, general and administrative costs declined to $41 million, or 11.1 percent of revenue, compared with $46 million in the fourth quarter.

Net income was $37 million, down from $52 million last quarter. These overall results translated into Adjusted EBITDA, as defined in the indentures governing our outstanding debt securities, of $81 million, compared with $88 million in the prior quarter.

“In the last few months we have taken several actions to reduce our corporate cost structure, including announcing a headcount reduction in January,” said Hock E. Tan, president and CEO of Avago Technologies. “These actions, along with our continued focus on expanding our product portfolio into areas offering higher growth potential, helped lessen the impact the general economic slowdown is having on our financial results.”

Financial Results Conference Call

Avago Technologies Finance Pte. Ltd. will host a conference call to review its financial results for the first quarter of fiscal year 2009 today at 2:00 p.m. Pacific Time. Those wishing to access the call should dial (480) 248-5081. No passcode is needed. A replay of the call is available through February 28, 2009. To access the replay dial (303) 590-3030 and reference the passcode: 3987051.


Non-GAAP Financial Measures

In addition to GAAP reporting, consistent with past practice Avago Finance reports net income or loss, as well as gross margin and operating expenses, on a non-GAAP basis. This non-GAAP earnings information excludes amortization of acquisition-related intangibles, share-based compensation expense, asset impairment charges, restructuring charges, acquired in-process research and development, debt extinguishment (gains) losses and the results of discontinued operations. In addition, Avago Finance also discloses Adjusted EBITDA as measured by the indentures governing the Company’s outstanding debt securities. Avago Finance believes this non-GAAP earnings information provides additional insight into the Company’s on-going performance and has therefore chosen to provide this information to investors in its debt securities for a more consistent basis of comparison and to emphasize the results of on-going operations. These historical non-GAAP measures are in addition to, and not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP net income (loss) and a derivation of Adjusted EBITDA in accordance with our note indentures are included in the financial tables attached to this press release.

About Avago Technologies Finance Pte. Ltd

Avago Technologies Finance Pte. Ltd. is a leading designer, developer and global supplier of analog semiconductor devices for communications, industrial and consumer applications.

# # #

Safe Harbor Statement

This announcement and supporting materials may contain forward-looking statements which address our expected future business and financial performance. These forward looking statements are based on current expectations, estimates, forecasts and projections of future Company or industry performance based on management’s judgment, beliefs, current trends and market conditions and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Accordingly, we caution you not to place undue reliance on these statements. For Avago Finance, particular uncertainties which could adversely or positively affect future results include cyclicality in the semiconductor industry or in our end markets; the recent financial crisis and its impact on our business, results of operations, and financial condition; fluctuations in interest rates; our ability to generate cash sufficient to service our debt and to fund our research and development, capital expenditures and other business needs; our increased dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain tax concessions in certain jurisdictions; our ability to protect our intellectual property; our competitive performance and ability to continue achieving design wins with our customers; any expenses associated with resolving customer product and warranty claims; our ability to achieve the growth prospects and synergies expected from our acquisitions; delays and challenges associated with integrating acquired companies with our existing businesses; our ability to improve our cost structure through our manufacturing outsourcing program; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Our Annual Report on Form 20-F filed with the SEC on December 17, 2008, recent Current Reports on Form 6-K, and other Avago Finance filings with the U.S. Securities and Exchange Commission (“SEC”) (which you may obtain for free at the SEC’s website at http://www.sec.gov) discuss some of the important risk factors that may affect our business, results of operations and financial condition.

 

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An affiliate of Avago Finance has filed a registration statement with the SEC relating to a proposed offering which has not yet become effective. Such securities may not be sold nor may offers to buy be accepted prior to the time that the registration statement becomes effective. This press release is not an offer to sell nor a solicitation of an offer to buy any securities.

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Investor Contact

Jim Fanucchi

Summit IR Group Inc.

(408) 404-5400

jim@summitirgroup.com

 

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AVAGO TECHNOLOGIES FINANCE PTE. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS—UNAUDITED

(IN MILLIONS)

 

     Quarter ended  
      February 1,
2009
    November 2,
2008
    February 3,
2008
 

Net revenue

   $ 368     $ 447     $ 402  

Costs and expenses:

      

Cost of products sold:

      

Cost of products sold

     204       263       230  

Amortization of intangible assets

     15       15       14  

Restructuring charges

     6       1       1  
                        

Total cost of products sold

     225       279       245  

Research and development

     62       69       66  

Selling, general and administrative

     40       48       50  

Amortization of intangible assets

     6       7       7  

Restructuring charges

     5       1       2  
                        

Total costs and expenses

     338       404       370  

Income from operations

     30       43       32  

Interest expense

     (18 )     (21 )     (25 )

Gain (loss) on extinguishment of debt

     1       —         (10 )

Other income (expense), net

     (2 )     (6 )     1  
                        

Income (loss) from continuing operations before income taxes

     11       16       (2 )

Provision for (benefit from) income taxes

     5       (9 )     3  
                        

Income (loss) from continuing operations

     6       25       (5 )

Income (loss) from and gain (loss) on discontinued operations, net of income taxes

     —         (7 )     9  
                        

Net income

   $ 6     $ 18     $ 4  
                        


AVAGO TECHNOLOGIES FINANCE PTE. LTD.

FINANCIAL SUMMARY (NON-GAAP) - UNAUDITED

(IN MILLIONS, except percentages)

 

     Quarter ended  
     February 1,
2009
    November 2,
2008
    February 3,
2008
 

Net revenue

   $ 368     $ 447     $ 402  

Gross margin

     164       184       172  

% of net revenue

     45 %     41 %     43 %

Research and development

   $ 61     $ 68     $ 65  

Selling, general and administrative

   $ 41     $ 46     $ 44  

Total operating expenses

   $ 102     $ 114     $ 109  

% of net revenue

     28 %     26 %     27 %

Income from operations

   $ 62     $ 70     $ 63  

Interest expense

   $ (18 )   $ (21 )   $ (25 )

Net income

   $ 37     $ 52     $ 36  

The financial summary excludes amortization of acquisition-related intangibles, share-based compensation, restructuring charges, gain (loss) on extinguishment of debt, and income (loss) from and gain (loss) on discontinued operations.


AVAGO TECHNOLOGIES FINANCE PTE. LTD.

FINANCIAL BRIDGE: GAAP TO NON-GAAP - UNAUDITED

(IN MILLIONS)

    Quarter ended  
    February 1,
2009
    November 2,
2008
   February 3,
2008
 

Net income on GAAP basis

  $ 6     $ 18    $ 4  

Amortization of acquisition-related intangibles

      

Cost of products sold

    15       15      14  

Operating expenses

    6       7      7  
    21       22      21  

Share-based compensation expense

      

Cost of products sold

    —         —        —    

Operating expenses

    —         3      7  
    —         3      7  

Restructuring charges

      

Cost of products sold

    6       1      1  

Operating expenses

    5       1      2  
    11       2      3  

(Gain) loss on extinguishment of debt

    (1 )     —        10  

(Income) loss from and (gain) loss on discontinued operations

    —         7      (9 )
                      

Net income on Non-GAAP basis

  $ 37     $ 52    $ 36  
                      

To supplement our unaudited condensed consolidated financial statements presented in accordance with GAAP, we have shown above a non-GAAP presentation of the Company’s net income, which is adjusted to reflect the GAAP results excluding amortization of acquisition-related intangibles, share-based compensation, restructuring charges, (gain) loss on extinguishment of debt, and (income) loss from and (gain) loss on discontinued operations. This non-GAAP presentation is provided to enhance the reader's overall understanding of the comparability of the Company's financial performance among periods.


AVAGO TECHNOLOGIES FINANCE PTE. LTD.

RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA - UNAUDITED

(IN MILLIONS)

 

     Quarter ended  
     February 1,
2009
    November 2,
2008
    February 3,
2008
 

Net income

   $ 6     $ 18     $ 4  

Interest expense

     18       21       25  

Provision for (benefit from) income taxes

     5       (9 )     3  

Depreciation and amortization expense

     41       42       39  
                        

EBITDA

     70       72       71  

Restructuring and other unusual charges

     12       6       4  

Purchase accounting adjustments

     —         —         1  

Share-based compensation

     —         3       7  

(Gain) loss on extinguishment of debt

     (1 )     —         10  

(Income) loss from and (gain) loss on discontinued operations

     —         7       (9 )
                        

Adjusted EBITDA

   $ 81     $ 88     $ 84  
                        

EBITDA represents net income before interest expense, provision for income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to give effect to certain items that are required in calculating covenant compliance under our senior and senior subordinated notes as well as under our senior secured credit facility. Adjusted EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense described above. EBITDA and Adjusted EBITDA do not represent net income, as that term is defined under GAAP, and should not be considered as an alternative to net income as an indicator of our operating performance.

 

Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow available for management or discretionary use as such measures do not consider certain cash requirements such as capital expenditures, tax payments and debt service requirements. EBITDA and Adjusted EBITDA as presented herein are not necessarily comparable to similarly titled measures.

      


AVAGO TECHNOLOGIES FINANCE PTE. LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(IN MILLIONS)

 

     February 1,
2009
    November 2,
2008(1)
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 195     $ 213  

Trade accounts receivable, net

     184       184  

Inventory

     178       188  

Other current assets

     43       34  
                

Total current assets

     600       619  

Property, plant and equipment, net

     291       299  

Goodwill

     170       169  

Intangible assets, net

     700       721  

Other long-term assets

     61       61  
                

Total assets

   $ 1,822     $ 1,869  
                

LIABILITIES AND SHAREHOLDER'S EQUITY

    

Current liabilities:

    

Accounts payable

   $ 169     $ 174  

Employee compensation and benefits

     43       74  

Accrued interest

     13       32  

Capital lease obligations—current

     2       2  

Other current liabilities

     53       48  
                

Total current liabilities

     280       330  

Long-term liabilities:

    

Long-term debt

     700       703  

Capital lease obligations—non-current

     4       5  

Other long-term liabilities

     55       55  
                

Total liabilities

     1,039       1,093  

Shareholder's equity:

    

Ordinary shares, no par value

     1,080       1,080  

Accumulated deficit

     (306 )     (312 )

Accumulated other comprehensive income

     9       8  
                

Total shareholder's equity

     783       776  
                

Total liabilities and shareholder's equity

   $ 1,822     $ 1,869  
                

(1) Amounts as of November 2, 2008 have been derived from audited financial statements as of that date.


AVAGO TECHNOLOGIES FINANCE PTE. LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(IN MILLIONS)

 

     Quarter ended  
     February 1,
2009
    November 2,
2008
    February 3,
2008
 

Cash flows from operating activities:

      

Net income

   $ 6     $ 18     $ 4  

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

      

Depreciation and amortization

     41       42       39  

Amortization of debt issuance costs

     1       1       1  

(Gain) loss on sale of discontinued operations

     —         7       (9 )

(Gain) loss on extinguishment of debt

     (1 )     —         6  

Loss on disposal of property, plant and equipment

     —         1       —    

Share-based compensation

     —         3       7  

Changes in assets and liabilities, net of acquisitions and dispositions:

      

Trade accounts receivable

     —         29       (13 )

Inventory

     10       7       (12 )

Accounts payable

     (5 )     —         6  

Employee compensation and benefits

     (31 )     4       (16 )

Other current assets and current liabilities

     (24 )     21       (40 )

Other long-term assets and long-term liabilities

     (1 )     (22 )     14  
                        

Net cash (used in) provided by operating activities

     (4 )     111       (13 )
                        

Cash flows from investing activities:

      

Purchase of property, plant and equipment

     (12 )     (18 )     (15 )

Purchase of intangible assets

     —         —         (6 )

Acquisitions and investment, net of cash acquired

     —         (32 )     (38 )

Proceeds from disposal of property, plant, and equipment

     —         5       —    

Proceeds from sale of discontinued operations

     —         —         25  
                        

Net cash used in investing activities

     (12 )     (45 )     (34 )
                        

Cash flows from financing activities:

      

Debt repayments

     (2 )     —         (200 )

Cash settlement of equity awards

     —         (1 )     (1 )
                        

Net cash used in financing activities

     (2 )     (1 )     (201 )
                        

Net increase (decrease) in cash and cash equivalents

     (18 )     65       (248 )

Cash and cash equivalents at the beginning of period

     213       148       309  
                        

Cash and cash equivalents at end of period

   $ 195     $ 213     $ 61